The US Dollar sits near the top of the currency leader board this morning, retaining its composure, though more by default of weakness elsewhere. Oil-sensitive currencies are lower on the back further weakness in the price of crude, equity markets were soggy on both sides of the Atlantic with some semblance of a slight appetite for the Japanese yen from risk aversion. The AUD sits below $0.72 this morning, weighed down it seems more from “guilt by association” from Oil weakness and despite higher base metals and Iron ore prices overnight. US data disappointed, adding to the likelihood the FOMC will leave rates on hold this evening and soften its language.
For anybody following my new Platinum Service it made 90 points yesterday and is now ahead by 1282 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
Sterling lost some traction yesterday in the wake of UK GDP printing below expectations, third-quarter growth coming at 0.5% against expectations of 0.6%, adding to evidence UK economy is slowing and yet another pointer that the BoE will not be hiking rates anytime soon.
While the US Dollar held its composure yesterday, the data reports were disappointing. The September Durable Goods Orders Report and the Conference Board’s Consumer Confidence reading for October both missed expectations. In the wake of the Durable Goods Orders Report, the Atlanta Fed’s GDPNow estimate for Q3 was shaved even further down to 0.8% from an already low 0.9%, the sting in the tail of the Durable Goods Orders Report coming with downward revisions. The Conference Board reported lower confidence and their jobs plentiful/hard to get index took a turn for the worse, another slither of evidence the labour market has lost some momentum in recent months. Not surprising then that the Interest Rate market further trimmed the odds of the Fed this evening increasing rates at FOMC to 4% from an already low 6%.
There was some good news for the big Dollar from an agreement between the White House and Republicans over budget spending parameters and extending the debt ceiling to 2017. It’s still fiercely opposed by the more conservative members of the Republican Party, but it seems likely outgoing House Speaker Boehner will be able to marshal sufficient Republican votes to get it across the line with a vote overnight. They would give the Fed clear Washington air in December should it be in a position to considering “lift-off” then, though that’s looking less likely now.
This morning on the economic front we have German Consumer Confidence at 7.00 am. This is followed at 10.45 am by ECB Member Praet speaking on the Euro-Zone Economy. At 12.30 pm we have the latest US Trade data and this will be closely watched after last month’s very disappointing report. Finally at the earlier time of 6.00 pm due to the US Clocks not changing until this weekend we have the eagerly awaited Fed Rate decision.
As for the FOMC, the market is priced for only a 4% chance of a move from the Fed from their 0-0.25% target range tonight and only a 33% move at the December 16 meeting. A more than 50% chance is not priced in until the March 16 meeting next year. The risk to market pricing is therefore likely to be tilted to a more hawkish than expected outcome in the Statement, anything that might tilt the market’s pricing that a move in December could yet be on.
December S&P 500
Finally the day of reckoning from the Fed has arrived as the two day FOMC Meeting concludes with their latest Interest Rate decision at 6.00 pm. As mentioned at length above the fact that only 4% of economists expect the Fed to move this evening and only 16% expect a Rate hike by December the risk/reward starts to lean towards a surprise hike. If the US Economy is really expanding at the rate that the Fed believe and if the true Unemployment Rate is at or close to 5% then they should move now but as we have seen over the past few months the most important criteria in my opinion is where is the stock market and the Fed are operating on the mantra of not upsetting the stock market at all costs as they have spent so much money on QE, which in turn has propped up the market. Today I am going to stay flat until we get the FOMC decision and if the market sells off after the announcement I will again look to buy the S&P on any dip lower to 2045/2050 with a 2041 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2031/2036 with a 2025 stop. As long as we are just above the 200 Day Moving Average and the fact that anything can happen this evening I do not want to be short the S&P at this time.
EUR/USD
My long 1.1045 Euro position from last Friday finally worked out as the Euro had a nice rally on the Durable Goods Orders release which enabled me to cover this position at my 1.1075 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.0930/1.0970 with a 1.0895 stop. Remember the Euro needs to break and close below 1.08 for me to start to turn bearish. I still do not want to be short the Euro at this time.
December Dollar Index
No change as I am still short at 96.90 with the same 97.30 stop. If the Dollar trades lower to 96.60 ahead of the FOMC decision this evening I will look to cover my short position and go flat. If I am stopped out of my short position I will be a more aggressive seller in front of 98.00 with a 98.40 stop. The 98.00/98.30 area is very strong resistance for the Dollar Index.
December DAX
No change as I am still a small seller on any rally higher to 10870/10930 with a 10970 stop. Given how overbought the DAX is on a Daily and Weekly basis I do not want to be long the market at this time.
December FTSE
I am still flat the FTSE and today I will lower my sell level slightly to 6410/6440 with a tight 6465 stop. As I have mentioned over the past few trading sessions I do not like the way the FTSE is trading especially with the UK Economy showing signs of weakness as shown by yesterday’s awful GDP data.
Dow Rolling Contract
I am still flat the Dow and today given the fact that we have the FOMC decision later I am going to raise my sell level to 17740/17790 with a 17830 stop. With the internals of the stock market continuing to weaken I do not want to be long the Dow at this time.
December BUND
I am still flat the BUND as I patiently wait for the market to hit my sell level that I have mentioned over the past 10 days. Now that the BUND is close to my sell target I am going to narrow my sell level to 158.90/159.25 with a 159.60 stop. I will try to scale into this position as I really believe the BUND will have difficulty in breaking the 159.50/160.00 major resistance level.
Gold Rolling Contract
Gold is continuing to trade heavy. I am still flat and today I will leave my buy level unchanged at 1148/1155 with the same 1144 stop.
Silver Rolling Contract
No change as I am still long at 15.88 with the same 15.60 stop. The market came close to my exit level at 16.00 and today I will leave my T/P level the same.
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