Is Trump rally fading?

By Margaret Yang, CMC Markets

US dollar index rallies for 10 sessions whereas equities retrace

The US Dollar Index retraced from a multi-year high of 101.50 to 101.30 on market open in Asia this morning, signaling the dollar rally is probably running out of steam as the market seems to have fully priced-in the “Trump effect” and an impending Dec rate hike.

US indices closed marginally lower last Friday, and upside momentum has stalled in recent days. The Hang Seng Index closed 0.4% higher on Friday, holding strong ground at around the 22,200 level, which remains a key support level in the near term. As the clock is ticking faster for the launch of the HK-SH stock link this month, increasing fund flows can be expected between mainland China and the HK market.

A strong US dollar continues to weigh on the commodities sector, especially precious metals namely gold, silver and platinum. Silver has reached a critical support level at $16.58. Platinum is also testing a key support level at around $925. If the dollar index retraces from current levels, then we might see a bounce in precious metal prices from here.

Crude oil, however, is trading higher this morning as hopes for OPEC to come up with a freeze plan underpin the effect of a strong USD. Immediate support and resistance levels for WTI Jan contract could be found at around $44.50 and $47.80 area respectively.

Crude Oil WTI Jan 2017