Global macro overview for 23/08/2017

Global macro overview for 23/08/2017:

The US political scene keeps influencing the financial markets worldwide. September is the month in which the budget for the next fiscal year should be approved. It is also the period when the issue of US debt limit will have to be resolved. Meanwhile, Donald Trump is treating the government shutdown to guarantee to fund the US-Mexico border wall project. For the time being, these declarations do not have a major, immediate and direct impact on the market, but with a view to addressing the key issues mentioned above, traders shouldn't move past them indifferently. The bigger the crisis is in the Trump administration and the Republican Party's rivalry is stronger, the less the chance of fulfilling the promises and the Dollar is getting weaker. In the current situation, investors have so much doubt in the stimulus of growth by cutting taxes and infrastructure package already, that any positive information in this field will support the US Dollar. For now, the continuation of acute rhetoric will, however, be interpreted as the inability to find consensus on key budget issues and US debt limit and is a major threat to the rejuvenating positive sentiment on Wall Street.

No opportunity for tax cuts means lower corporate profits. This, in turn, adversely affects the valuation of shares. To a large extent, the American stock market has plummeted recently, and more and more people are starting to talk loudly about the upcoming bigger correction. If we add an uncertain geopolitical situation in form of US-North Korea conflict, the recipe for a larger corrective cycle is ready.

Let's now take a look at the SPY index technical picture at the H1 time frame. After a lower low at the level of 241.80, the market rebounded from the oversold levels and moved higher towards the golden trend line resistance but did not manage to violate it and currently trades just in the middle of the range. The next technical resistance is seen at the level of 245.54 and 246.11.


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