Daily Market Analysis – 17.11.2017

Asian markets pulled out of their week-long slump on Thursday, with most indices across the region posting gains despite the overnight weakness on Wall Street and continued uncertainties regarding U.S. tax reform plans. Japan’s Nikkei snapped back from recent losses, ending a six session losing streak and making solid gains on excellent corporate earnings reports. Mainland China was the laggard of the day however, as investors there remain concerned about deleveraging and a potential slowdown in the Chinese economy. Australia’s S&P/ASX 200 ended its longest losing streak in six months with a modest gain despite continued softness in commodity prices.

European markets took their lead from the gains in Asia, and also had good news from the corporate earnings front leading to them snapping their own losing streak. It had been the worst run of losing sessions in a year for European markets, so the rebound didn’t come as a surprise to many, who said bargain hunting was also present in trading action. The automotive sector did particularly well after data was released showing a large increase in October new car sales across the European Union. Shares of banks were also up significantly as investors were anticipating the passage of the U.S. tax reform bill later in the day. In the U.K. the FTSE snapped its own five session losing streak, rising modestly on the same bargain hunting and good corporate earnings that helped lift European markets.

U.S. markets began the day on an upbeat note in response to overnight gains from Asian and European markets. That positive sentiment was enhanced by better than expected earnings from Wal-Mart (NYSE:WMT) and Cisco, which led the consumer staples and technology sectors to lead gains across the broader market. The afternoon saw the House of Representative pass the tax reform bill that has caused so much angst to investors, driving equity markets to new heights. By the close the tech-heavy Nasdaq was at a new record closing high, while the Dow Industrials and S&P 500 both flirted with new records as well. While investors will still need to see the Senate pass the bill, and indications are they may have some sweeping changes in mind, it is a positive for markets to see the tax reform bill moving forward.

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The fourth largest cryptocurrency by market capitalization surged higher early Thursday after traders learned that American Express (NYSE:AXP), in conjunction with Santander (MC:SAN) Bank, would be using the Ripple blockchain and network to create the first ever payment channel between the U.S. and the U.K. The technology promises to deliver nearly instantaneous transfers, a vast improvement over the SWIFT banking system that currently takes several days to process a funds transfer. The gains didn’t fully hold throughout the session, however Ripple remained 4.8% higher late Thursday. If the new channel works and is expanded, Ripple could see exciting gains throughout 2018.

The pair continued higher for a third session Thursday, and has extended gains above the 1.3200 level as the Asian session began Friday. It looks as if we will see a test of the double top that was put in place in October at the 1.3300 level, but it will remain to be seen of the pair can break through the obvious resistance at that level. Economic data from the U.K. remains mixed, and it is probable that the interest rate hike from the Bank of England several weeks ago was a one-off and won’t be repeated anytime soon. Conversely, the Federal Reserve is ready to raise rates next month, and could give markets several more interest rate hikes in 2018. All of this points to a stronger USD and a weaker Pound, making it more likely we’ll see a break of support at the 1.3050 level than a break of resistance at the 1.3300 level.

Written By: AvaTrade