USD/JPY Daily Signals – Dec 18, 2017

Greenback shows sign of rise

The Republicans endorsed the conference statement that reconciled the House and Senate tax bill passed by each chamber. We proceed to expect final movement of the tax bill probably by the end of next week despite last minute discussions. The House and Senate both will require voting on the conference bill which should be released this evening before the final legislation addressing the President Trump.

The House Speaker Ryan focusing notably on welfare programs specified that the Congressional Republicans will pursue to use budget reconciliation, the vehicle for tax reform and strived to repeal and replacement of the Affordable Care Act (ACA) to improve the US entitlement system in 2018. Thus, government programs and fiscal policy could again share center stage next year.

The Congress will require to expand the government’s spending authority ahead Friday to prevent a government shutdown. This deadline was the result of temporary two-week expansion advanced last week. We anticipate Congress to advance another sustaining resolution that will extend the spending authority into January 2018 post taking care of tax reform at the beginning of the week.

Besides lot of uncertainties than usual around the projected X-date, the debt limit will also require to be mentioned someday in Q1 2018. This should offer enough time to arrange a longer term spending agreement. After conquering Roy Moore in a state that President Trump won by 28pp in the presidential election, the Democrat Doug Jones won Alabama’s major election for US Senate.

During October, the single-family housing starts recovered as construction activity returned to its previous trend post the weather disturbances. We anticipate a more gradual hike in the month of November and expect the housing starts to decline 5.0% m-o-m to an annualized rate from 1290k to 1226k.

Following a sharp 36.8% hike in October, we anticipate a steady negative payback for the multi-family housing starts. Despite high vacancy rates, the number of multi-family residential building under construction remains exalted and completions of these properties are on the increase. We maintain that the multifamily housing starts will probably remain down casted considering the current high supply relative to demand.

We anticipate a decline of 2.0% to an annualized rate of 1290k for housing license as the series returns to its direction after increased volatility due to the recent hurricanes. This suggests that the disparities in rental housing markets will probably hold on the near term.

The USD/JPY pair is trading above the 112.46 level. The pair gets a good support base that reinforces the expectations of continuing the bullish bias. This can be seen on the four hour chart price as respected this level. We keep expecting the same this time as well. This provides signals for the price recovery in the upcoming days. The pair is supported by stochastic positivity that appears and rises clearly on the daily time frame. The pair remains bullish for the moment with pair trading on rebound after testing 100EMA. This makes the trading to settle now at the support area that appears in the chart. Some consolidations would be seen with bullish momentum. A further rise is expected from current levels on the new found support area and beginning of the new trend and the first main target located at the 112.742 level. The pair breaking at this level besides holding above it will push the price to resume with the bullish momentum. The pair’s next target is located at the 113.182 level.


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