Some of Today's Highlights
- US Stocks had a strong rally on the back of President Trump's statement of a "phenomenal tax plan" being presented in the coming weeks.
- A press conference from Trump's meeting with the Japan's Prime Minister Shinzo Abe will be tomorrow.'
- In a meeting with Airline CEOs, Trump promised to help them combat foreign competition
- Mexico increases their borrowing rate
Our Analysis
With the Trump's statement of a tax plan being presented very soon, it has started the gears of the reflation trade again. We believe the Trump rally has not finished and that it has been slowed down as investors look for solid direction. The administration has had much focus on other topics such as immigration and border security. This left uncertainty in the market about what he was going to do. Although many believe the reflation trade has ended, we cannot forget how powerful tax cuts and infrastructure spending are in the economy. With more clarity on his plan it could have a huge boost on the dollar and US equity markets.
Markets have their eyes glued into the Trump-Abe press conference tomorrow what they talked about in their meeting. Main keys to look out for are Trump's tone towards Japan trade. Any tone that seems to attack the trade deficit could be negative to the dollar. Also look out if Japan is willing to invest in US infrastructure which would be positive for the dollar.
With Mexico facing strong inflation and a weakening currency, since Trump's election, the Central Bank had to raise its interest rates. They believe that it will not affect the economy. The Peso has been regaining ground against the dollar this year. As the US seems to be backing a little bit off NAFTA this peso rally will continue. Be on the lookout for any mention of the trade agreement which would continue the decline of the Peso.
Currency Analysis
Looking for the USD/JPY to give up some of its gains short term to find a good position to go long. We believe that the press conference will have news that will support its rally. It is unlikely that you visit another foreign leader and deliver bad news.
EUR/USD we seeing it continuing its decline. We will hold that narrative and reevaluate if it breaks through 1.6777 level.
Our Stock Picks tomorrow
Earlier today the federal appeal court announced that they will uphold the decision to ban Trump's immigration executive order, we see this as bullish for the tech sector.
$AMZN and $GOOGL are our picks for tomorrow's trading. They both declined after their earnings report and both have been battling to overcome its 20 MA line. This recent news about the ban could be the catalyst we need to push the stocks over and have them rally.
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