Summary:
- State of the Union speech is one of the major events this week
- Trump is set to speak on immigration, infrastructure plan, could address US dollar
- US500 at the crossroads, EURUSD defends 1.23
This week is full of important events in the United States – FOMC, payrolls report, ADP and ISM reports – they all will be tracked by the markets. The focus, however, is on Donald Trump who’s set to deliver his first “State of the Union” speech tonight.
What the State of the Union is?
The State of the Union speech is an annual event delivered by the president to the joint session of the US congress. Although Trump had a similar speech last year it was not labelled “SotU” as the first speech does not count. In this context this is the first time for Trump and thus it is highly anticipated.
What time is it?
It’s 9pm EST on Tuesday which means that for European traders it will be on Wednesday (2am GMT, 3am CET). There’s no preset time but the speech delivered last year lasted about an hour and was the longest among Republican presidents. However, Obama and especially Clinton liked even longer speeches.
State of the Union address takes place at 2am GMT on Wednesday and could last for about an hour. Source: The APP
Why do markets care?
Donald Trump has had a major impact on the markets since his electoral campaign and investors pay attention. Even though his grand promise of a major tax cut for corporations has already been delivered (and Trump is set to take advantage of it in the speech) there are many tense issues waiting to be resolved. First and the most urgent is immigration policy that turned out to be highly divisive and at the same time was somehow linked to spending bills that Congress has to vote in order to keep avoid another government shutdowns. Second, Trump is believed to speak about his long awaited infrastructure plan although if last year speech is any indication, he could stop short of providing details. Finally, markets have seen major moves lately with stocks soaring, bond yields climbing and US dollar plunging and investors will be looking for any clues. If Trump addresses US dollar valuation, it could have a serious impact, at least in the short term.
Relevant markets:
US500
An incredible rally on US500 was snapped on Monday and very short term tendencies are now negative on this instrument. For instance, 50, 75 and 150 hours averages have been broken for the first time this year. However, looking at D1 interval it’s just a small profit taking. If it is extended a support could be found at a juncture of an upper limit of expansion channel and a psychological level of 2800 points. Taking a longer view this market is set for the 10th straight month of advances – the last such situation occurred in 1958. This shows us how stretched the US indices like US500 are.
US500 has seen a massive run since Donald Trump was elected – but can it last? Source: xStation5
EURUSD
Trump’s comments on the dollar helped halt a rally on the EURUSD but a correction has been shallow and encompassed within a wedge (continuation pattern) formation. The key support level of 1.23 has not been even tested and bulls have recovered above, coming back above 150-hours average and confirming upwards trend. For as long as 1.23 holds the trend is bullish and the nearest resistance can be spotted at 1.25.
EURUSD remains in a bullish trend for as long as 1.23 is defended. Source: xStation5