The FOMC left Interest Rates on hold as expected with a statement only and only finessed. The market is still firmly priced for further rate hike next month. The US Dollar rose on this news with the EUR/USD closing near the lows of the day at 1.1360. ECB President Dragi was speaking in Dublin yesterday where he said he was positive on Euro outlook, but warns against complacency; still on track to end QE this year. Sterling fell yesterday on the back of more political argy bargy but some investment houses are still betting on a Brexit deal/Pound rally.
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For anyone following my Platinum Service it was flat again yesterday as for the second consecutive trading session none of my calls got hit and is still ahead by 285 points for November, having made 2094 points in October,1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
The past 24 hours have seen little or no movement with equity markets making some gains in Europe, but soggy in the US after Tuesday’s post Mid-Terms bounce. The US Dollar has been a little firmer, not so much from anything that stands out particularly on the market’s radar than perhaps the realisation that it remains attractive on a yield basis, closing higher on the back of the FOMC Statement.
For the Australian Dollar, while yesterday’s solid Chinese export and import growth in October (despite the increase in US tariffs from September 24) provided an understandable immediate fillip to the AUD, it has not been able to make further headway higher, held back by some further incremental weakness in the CNY/CNH and the post-FOMC USD support.
The US Dollar has been choppy since the release of the FOMC statement late yesterday. In net terms, as I go to print, it is higher. It dipped initially as the little-changed Statement did call out that growth in business fixed investment has moderated from its rapid pace earlier this year, but just as quickly the USD reversed course higher. The Statement also noted that the unemployment rate had ‘’declined’’, previously describing it as having ‘’stayed low’’. Both of these changes are nowhere near where you would describe them as at all seismic, but marginal changes in characterisation. They continued to describe the risks to the outlook as roughly balanced. The Statement is a half nod to market pricing expecting a further increase in the Fed Funds Rate at its December 18-19 meeting.
The Euro has also pulled back and since the FOMC, but again it is very much a US dollar story. ECB President Draghi was addressing the Irish Parliament and noted a still positive outlook for the Euro-Zone’s growth though emphasised that he needed to retain lots of optionality in being able to adjust the Bank’s forward guidance if need be. Draghi came in for a deal of flak in favouring the financial sector big end of town and not European citizens with its low rates policy. He retorted that he was not the favourite of European banks for his low rate policy and that if there was any doubt, just read about low rates in German newspapers!
Brexit
While there have been no definitive announcements, there was apparently a draft timetable doing the rounds of Whitehall suggesting that it could all be finalised as early as the first half of next week, culminating in a statement to the Commons from the PM on Wednesday. Take these stories for what they are worth, but there have been some noteworthy investment names cited as now placing bets on a rebounding Pound. Most analysts are expecting a 3-5% Sterling rally should a deal be made. EUR/GBP remains heavy, the pull-back in Sterling this morning since the FOMC a big dollar story, as it has been for the other majors.
Equities
It has been a choppier session for stocks, European markets making some gains, but the US main boards have been giving back part of the immediate post Mid-Term bounce, the S&P closing down 0.3%.
Bonds and commodities
Bonds have been little changed with again some mild steepening of the curve, 2s up less than a basis point as the market continues to price in a hike in December. The exception has been Italy as the stoush with the EC continues over their Budget, Italian 10y bonds up 5.9bps against flat to a marginal rise in core European yields.
Meanwhile in the commodity space, oil has weakened further.
This morning on the Economic Front we have UK Industrial Production, GDP and the Trade Balance at 9.30 am. This is followed by US PPI at 1.30 pm. Finally we have the University of Michigan Consumer Sentiment and Wholesale Inventories at 3.00 pm.
December S&P 500
The S&P traded in a narrow range yesterday after it’s huge rally on Wednesday. I am still flat and today I will continue to be an aggressive buyer on any dip lower to 2765/2780 with the same 2755 wider stop. The 50 Day Moving Average has dropped slightly to 2731 and today I will now lower my sell level to 2824/2838 with a 2848 stop.
EUR/USD
I am still flat the Euro which had a late sell-off. The Euro has strong support at the 1.1300 area and today I will now lower my buy level slightly to 1.1270/1.1320 with a 1.1235 stop.
December Dollar Index
I am still flat the Dollar. The Dollar has strong resistance from 97.00/97.40 and today I will now raise my sell level to this area with a 97.75 higher stop.
December DAX
The DAX had a late sell-off into the New York close with the market just missing my 11470 initial buy level and I am still flat. Given the huge 210 Handle rally in the S&P over the past 10 days it is natural for the markets to take a breather. Today I will now lower my buy level to 11310/11380 with a 11240 stop. I still do not want to be short the market at this time.
December FTSE
I am still flat the FTSE which traded in a narrow range and was heavy despite the weaker Pound. The fact the FTSE could not rally yesterday is a concern. For this reason I will now lower my buy level slightly to 7000/7045 with a 6960 stop.
Dow Rolling Contract
The Dow tried to rally before running into a brickwall of resistance at the 25280 area. I am still flat and today I will continue to be a seller on any rally higher to 26330/26500 with the same 26640 tight stop. Meanwhile I will also leave my buy level unchanged from 25700/25860 with a 25580 stop.
December NASDAQ
No Change as I am still a small buyer on any dip lower to 7035/7085 with a lower 6980 stop. The Nasdaq needs to break and close over the key 7300/7400 resistance area or else we could see a quick reversal lower of this week’s strong rally.
December BUND
No Change as my only interest in selling the Bund is still on a rally higher to 159.85/160.35 with the same 160.75 wider stop.
Gold Rolling Contract
The boring action in both Gold and Silver continues as it has done for nearly all of 2018 to date. I am still flat the market and I will continue to be a buyer on any dip lower to 1205/1214 with the same 1198 stop.
Silver Rolling Contract
No Change as I am still a buyer on any dip lower to 13.90/14.30 with the same 13.55 stop which is just below the December 13.62 low print.
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