The US political shake up has been polarising markets as of late, and none more so that in the Federal Reserve as there are 3 governors seats up for grabs on the FED board this year and it looks extremely likely that Trump will look to fill them all with hawks. The question will be how big will the impact be, many believe they will look to spend up heavily in infrastructure in the United States which will in turn lead to the US market rallying further and the USD jumping higher. The trade issues though are the black mark for many, and with Trump threatening them the flow over effects in to the FX and equity markets are likely to be great. For the equity markets though it’s certainly a boost as many expect that US based companies will be the greatest benefactor as Trump is pro business and looking to stimulate the economy. So far the S&P 500 has seen some strong rallying and it was further helped by the news out of OPEC today, and during the last part of the year we traditionally see some further buying before the new year rolls over.
The S&P 500 has so far struggled to maintain momentum past 2200, as it represents a psychological barrier for the market. For the next level of resistance I would expect the market to look for another level and this would be likely found at 2250. Support would likely be found at 2200 as well in the event it breaks out and looks to find some safety, with 2168 the next level of support. I would also be watching the 20 day moving average as this has previously been a key area for dynamic support for past movements.
It’s easy to forget the other parts of the world with the current market climate that we have today, but for the Australian dollar it has been a bumpy ride, and this even comes in the face of commodity prices rising recently. The Australian dollar had been causing headaches for the Reserve Bank of Australia given how high it has been in recent times and the recent rate cuts were meant to remedy that. However, as ever the case the markets have not agreed and the AUD had remained quite high. The recent political moves have in turn caused the USD to rise and the AUD to slip lower on the charts, and many are expecting further slips with the hawks likely to come to power in the FED in the USA.
For the AUDUSD it’s likely looking a little bearish despite the fixed interest rates being attractive to overseas investors. The recent bounce on support at 0.7328 has shown that the bulls are still in the market, but only at certain opportunities. Any larger drops will likely be to 0.7226 where it would struggle to find any further movements unless there was a strong sell-off in the AUD.