There were some good numbers out today on the schedule economic releases, though they were not really tier-1 market events. The US dollar took the opportunity to make the best of some good news both from the US Senate who is thrashing out their differences on how to tax and spend over the coming years and from an improved sentiment reading for October.
fundamentals, macroeconomics, fiscal policy, technical analysis, support & resistance
The US dollar has been stronger during the US session following on from better-than-expected data this afternoon and some movement within the corridors of power. The only bad news out today that affected the dollar came from the S&P CoreLogic Case-Shiller 20-city index, which showed home prices increased 19.7% Year-on-Year in August, down slightly from a record rate of 20% in the previous month and under analysts’ expectations of 20%.
The US New Home Sales rose by 14% to a seasonally adjusted annual rate of 800K in September of 2021, up from a downwardly revised 702K in August, and well above market expectations of 760K. This data is viewed as more important for the economy and the US dollar rose on the back of the beat. A shortage of previously occupied homes for sale and strong demand boosts the reading to the highest level in 6 months. A year earlier, the median sales price was $344,400. Now, it's $408,800.
The US Richmond Fed Comp Index came in at 12 for October compared to the previous reading of -3.0.
A positive US consumer confidence for October came in at 113.8 versus the expected 108.30 and above an upwardly revised September figure of 109.8. Even though inflation is rising the impact on consumer confidence has not been dented as consumers are still buying big-ticket items and that will help support the economy and GDP figures.
The daily price action in the DXY is trading above the Ichimoku cloud with the previous swing high being a key level of resistance and a defining point in the uptrend. $94.50 may be back on the cards this week. The reason I say this is that there looks like there could be a resolution to a lot of the political disparities between the Democrats and the Republicans when it comes to the next budget and spending packages.
A reconciliation bill of $1.5 trillion, according to Senator Joe Manchin, would be "more than fair," considering that many of the items included in social spending legislation are already included in his fellow Democrats' $1.9 trillion American Rescue Plan passed in March 2021.
According to Manchin, there is a "high probability" that both the bipartisan infrastructure bill and the reconciliation bill will pass. He further clarified that he would be in favor of a 15% minimum corporate tax rate. On the federal debt ceiling, he noted that the president should be authorized to raise it and that Congress should have the right to override the president's decision.
UK Retail Sales beat analysts' forecasts in October, the CBI's distribution trades survey's retail sales balance in the United Kingdom jumped to +30 in October 2021, compared to +11 the previous month and well above market expectations.
The pound may have been able to continue its breakout to the upside if it hadn’t been for the renewed strength in the US dollar index and pound traders should be prepared for a retest and continuation trade around the 1.3750 level.
The AUDUSD continues to trade above the daily 200 ema ahead of the next session Australian Q3 CPI data. If CPI comes in hotter than expected the RBA may have to shift towards being more Hawkish as covid restrictions are beginning to be lifted.
The USDJPY has been able to undo a lot of the pullback in prices that we had at the end of last week. Prices found support from a level of demand around 113.00 and now the USDJPY is up 0.39% today but still down -0.19% over the last week. The Nikkei225 continues to trade higher and is up 1.77% and leads most equity indices higher. It is likely that we are to see higher prices inequities, as earnings season is currently showing better than expected results in corporations’ profits and we have the US debt ceiling lifted until early December. If the debt ceiling can be lifted which would help the banks drain their reserves on new Treasury issuances, and if the banks are able to maintain increased lending we could be in for a real boost to the economy. If the Biden spending packages fail to pass and the debt ceiling is not sorted, around December 3rd could be the market top and an early end to the Santa Claus rally.