Trump’s big, beautiful bill passes US Senate

Trump’s big, beautiful spending bill is in focus as it passed the US Senate with the narrowest of margins yesterday. As mentioned in yesterday’s report the bill includes tax cuts, increased fiscal spending with the downside being that it is also expected to shrink welfare programs and increase the US national debt which is already at very high levels. The bill is highly controversial and it’s characteristic that US Vice President Vance was forced to cast the tie-breaking vote for the bill to pass. The legislation is now to return to the House of Representatives, and US President Trump wants to sign it by July 4th, a symbolic date. Yet the vote in the House is uncertain as a number of Republicans have reportedly expressed doubts opposition to some of the Senate’s provisions, while others may have changed their minds as public pressure seems to grow. Overall, we see the case for the bill to macroeconomically weigh on the outlook of the US and its passing could cause the USD to slip further. On the other hand, we note that the ISM manufacturing PMI figure for June was higher than expected, while the JOLTS job openings figure also surpassed market expectations, both releases improving the outlook for the US economy. Today we note the release of the US ADP employment figure for June which is expected to rise substantially. Should the actual figure exceed market expectations, we may see the USD getting some support and vice versa, given also the perception of some traders who view the ADP employment figure as a forerunner for the US employment report’s Non-Farm Payrolls figure which is due out tomorrow. The release of June’s US employment report is expected also to affect the market’s extensive rate-cutting expectations which currently include three rate cuts until the end of the year, starting from September onwards and until the end of the year and tend to weigh on the greenback.

In the FX market, USD/JPY continued to edge lower yesterday aiming for the 142.20 (S1) support line yet corrected a bit higher in today’s Asian session. For the time being we tend to maintain a bearish predisposition, yet note that some signs of stabilisation seem to be present. Should the bears remain in charge as expected we may see the pair reaching if not breaching the 142.20 (S1) support line, thus opening the gates for the 139.60 (S2) support base. A possible bullish outlook could emerge if the pair breaches the 145.50 (R1) resistance line and continues higher aiming for the 148.20 (R2) resistance level, a scenario that currently seems remote.

As for US equities we note the maintaining of the market’s relative optimism, yet the bulls for S&P 500 seem to be getting tired as its price action seemed to stabilise yesterday, just above the 6140 (S1) support line. For the time being the bullish outlook seems to be present yet the RSI indicator has breached the reading of 70, implying a strong bullish sentiment for the index yet at the same time implying that the index is at overbought levels and is ripe for a correction lower, while similar signals are being set from the price action flirting with the upper Bollinger band. For the bullish outlook to be maintained, we would require S&P 500’s to continue aiming for the 6400 (R1) resistance line, while a bearish outlook, despite being remote currently, could emerge should the index’s price action drop, break the 6140 (S1) support line and continue to break also the 5925 (S2) support level.

Other highlights for the day:

We make a start today with the speeches of ECB’s Montagner, Cipollone and Lane, while later we get the US ADP figure for June, Canada’s manufacturing PMI figure for June and oil traders may be more interested in the release of the weekly US API crude oil inventories figure. In tomorrow’s Asian session, from Japan BoJ’s Hajime speaks, while we note the release of China’s Caixin services PMI figure for June and Australia’s trade data for May.

USD/JPY Daily Chart

• Support: 142.20 (S1), 139.60 (S2), 137.25 (S3)
• Resistance: 145.50 (R1), 148.20 (R2), 151.20 (R3)

US 500 Daily Chart

• Support: 6140 (S1), 5925 (S2), 5745 (S3)
• Resistance: 6400 (R1), 6600 (R2), 6800 (R3)

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