Fed minutes scare traders knocking stocks and the Aussie dollar lower

November 21, 2013

The taper is back on the table and the market didn’t like it at all as the Fed minutes reinforced that the fed was more prescient about the real economic impact of the Government Shutdown than many pundits, your humble analyst included. Rather the Fed, like US employers and the other data we have seen recently, looked through the Government shutdown as only a temporary blip on the economic horizon. This meant that the key sentence for markets to focus on was “They (FOMC) generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labour market conditions and would thus warrant trimming the pace of purchases in coming months.”

So the inevitable happened and the happy times traders were having earlier in the day gave way to some selling in the afternoon as traders recognised that even though last night’s US CPI undershot expectations, printing -0.1% on the back of fuel and energy falls, Dectaper might be on the agenda and certainly the Taper is on the table for early 2014.

At the close the Dow sits at 15,901 off a high of 16,017 for the third “fail” about 16,000 in a row. The Nasdaq is down 0.27% at 3,921 and the S&P 500 is down 7 points to 1,781. In Europe stocks didn’t perform well at all and the FTSE fell 0.25%, the DAX was up slightly by 0.09%, the CAC fell 0.10%. In Milan stocks fell 0.21%, and in Spain they dropped 0.72%.

Closer to home on the Sydney Futures Exchange the SPI 200 contract at 5.19 am was up 22 but it is now down 10 at 5301 bid and has now decisively broken a 6 month uptrend on the charts. But it’s life is not its own and it clearly followed the moves on US markets but it is going to be an interesting day on the local market.

I’m short from 5397 on the SPI and the close at 5301 is a break of the uptrend line and further falls seem inevitable in time.

As you can see the 5300 level was also previous resistance which doubles up as a big level – the target is now 5250/60 and ultimately 5068.

On Forex markets we now have proof in the price action that the Australian Governments big sales of 20 year bonds to offshore investors pushed it higher the other night and it has been knocked way back down to 0.9327 this morning 120 points off the high of the day which was exactly the same level as the previous day at 0.9447.

It’s clear the Aussie is in a bit of a range at the moment and while yesterday looked like it might run higher the fact that it was as close to a negative outside day as you can get (same high instead of higher high in this case) suggests that it will remain offered up in the mid 94’s now and will be looking for support.

The big support is 9.250/60 and resistance is 0.9450/60 so we are sort of mid range here at 0.9340 this morning. 1 hour charts are oversold, 4 hours mixed so a rangy day is the most likely outcome.

The taper also helped the US dollar against the Euro which fell 0.81% to 1.3429 but GBP was largely unchanged at 1.6103. Interestingly USDJPY hasn’t gained and still sits below significant technical resistance above 100 at 99.95 this morning.

On commodity markets Gold is getting crushed and is down at $1244 for a fall of $1.2 or $15 overnight. Copper hasn’t budged from $3.16 oz, corn was 0.3% lower, wheat fell 0.46% and soybeans were largely unchanged. Bitcoin’s moves have been amazing recently and its traded a $900 high and a $453 low over the past day and a half and is back at $590 this morning. Ridiculous volatility and clearly a sideshow market at the moment even though the BoE and Fed and your author think it has long term promise.

On the data it is a big day with the preliminary releases of the HSBC manufacturing PMI for China and then the related releases for Europe and the US including services PMI. These data have the ability to reverse or extend last nights move but they are unlikely to be passive.

Have a great day and good hunting

Greg

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