Daily Analysis: Senate Tax Bill Proposal Saves the Day but Bonds Scream Trouble

Thursday Market Recap

Asset Current Value Daily Change
S&P 500 2583 -0.29%
DAX 13,182 -1.45%
WTI Crude Oil 57.02 0.37%
GOLD 1288.00 0.21%
Bitcoin 7110 -2.83%
EUR/USD 1.1642 0.41%

Today’s session seemed like the end of the narrowing rally that has been plagued by a far-from-rosy picture on the bond market. The yield curve has been flattening in an accelerated fashion recently, which is usually one of the strongest indicators of the end of a business cycle, while high-yield bonds also turned sharply lower lately, signaling risk aversion among bond investors. The negative news flow regarding the GOP’s tax plan struggle also weighed on sentiment, and the major indices lost ground in early trading.

High Yield Corporate Bond ETF (HYG), 4-Hour Chart Analysis

Later on, rumors and leaks started circling about a coming bill proposal, and that stopped the erosion of prices, resulting in moderate losses at the closing bell, following the actual release of the proposal. The bill is significantly different from the House Bill, and most importantly it would delay the corporate tax cut by a year. Despite the late bounce in equities, safe-haven assets remained stable, with both the Japanese Yen and Gold finishing in the green.

WTI Crude Oil, 4-Hour Chart Analysis

Forex markets also had an active session despite the relatively empty economic calendar, as the Dollar got under pressure, although the Greenback’s losses remained limited. Besides gold, oil also finished higher among commodities, as the political turmoil in Saudi Arabia continued to make headlines, and the positive Chinese inflation release also boosted the price of the Black Gold.

Cryptocurrencies

The rally in altcoins continued in earnest today, while Bitcoin remained volatile after the Segwit2x cancellation. IOTA was the star of the day again among the majors, now shooting up to the $0.60 level shortly after trading just above $0.30. Ethereum’s move above the $315 resistance also made traders excited, while Litecoin, Dash, and Monero also continued their break-outs.

BTC finished the session on a negative note, trading near the $7000 level after the US close. Ripple, NEO, and ETC had a less stellar day, although NEO briefly traded near the $34 level, and Ripple also attempted a break-out, riding the bullish altcoin wave.

IOTA/USD, 4-Hour Chart Analysis

Key Economic Releases on Thursday

Time, CET Country Release Actual Expected Previous
03:30 CHINA CPI 1.9% 1.8% 1.6%
03:30 CHINA PPI 6.9% 6.6% 6.9%
15:30 CANADA NHPI 0.2% 0.2% 0.1%
15:30 US Unemployment Claims 239,000 232,000 229,000

Key Economic Releases on Friday

Time, CET Country Release Expected Previous
02:30 AUSTRALIA RBA Monetary Statement
11:30 UK Manufacturing Production 0.3% 0.4%
11:30 UK Goods Trade Balance -12.9 bill -14.2 bill
17:00 US UOM Consumer Sentiment 100.8 100.7

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Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.