16 Sept: Markets choppy but underpinned by hopes of an accommodative Fed at today’s FOMC Meeting. UK CPI, US R/S, B/I also due.

16 Sept: Markets choppy but underpinned by hopes of an accommodative Fed at today’s FOMC Meeting. UK CPI, US R/S, B/I also due.

Stocks have closed mixed on Tuesday, with the DJI flat and the S+P up by 0.5%, while the Nasdaq headed higher, at the end of a choppy session, as tech shares came back into favour with the FAANG stocks all making gains. Banks were generally lower and were a drag on the S+P although the mood was generally upbeat as traders look to the hope that the Fed will continue with its supportive policy stance at today’s FOMC Meeting.

The US$ recovered from early losses, where the Euro was able to test 1.1900 after a better than expected ZEW, to return to previous levels as traders reposition themselves ahead of the upcoming Meeting. Also of note, the Aud$ reached a high of 0.7342 in early US trade, underpinned by yesterday’s China data, but is beginning Wednesday back at 0.7300. Sterling did recover a little ground despite some mixed UK jobs data, while US$Jpy fell towards the mid-August low of 105.10 and does look heavy but is unlikely to do an awful lot from here ahead of the Fed announcement.

Commodities were choppy and saw the metals pretty much track the US$ before ending the day pretty unchanged. Oil however put on 3%, underpinned both by the production shutdown ahead of the hurricane that is heading rapidly towards the Gulf of Mexico and also by the API, who reported a draw in crude oil inventories of 9.517 million barrels for the week ending September 11, much higher than the predicted draw of 1.271-million barrels.

The data on Tuesday saw the Germany ZEW Economic Sentiment rise to 77.4 in September, up from 71.5, beating expectation of 70.0, while the Current Situation rose by 15.1 pts to -66.2. The Eurozone ZEW Economic Sentiment rose by 9.9 pts to 73.9, Current Situation rose by 8.9 pts to -80.9.

The UK unemployment was mixed, and saw the headline rate rise to 4.1% in the three months to July, up from 3.9%, albeit in line with expectations. The claimant count slipped to 73.7K in August from the previous 69.9K but easily beating expectations of 100K.

The US Empire State Manufacturing index rose to 17.0 in September, up from 3.7 and beat expectations of 6.2. Elsewhere, US import price rose 0.9%mm in August, above expectation of 0.5%mm while industrial production rose 0.4%mm, below expectation of 0.8%mm although July was revised 0.5% higher to 3.5%.

Wednesday will see little action until the Fed decision, with the market likely to largely ignore the NZ Q2 Current Account, Australian New Home Sales and the UK CPI, PPI, RPI, along with the other data due from the US prior to the FOMC Meeting outcome; this being the August Retail Sales (exp +1.0%mm & Control Group; exp +0.5%mm), Business Inventories (exp +0.1%mm) and NAHB Housing Market Index (exp unchanged @ 78). The Fed is widely expected to keep policy unchanged, with all eyes on how they intend to produce growing inflation in order to allow the economy to run hot in order to stimulate economic growth as a path out of the pandemic. In reality, the Fed should follow up from Jackson Hole and provide clarity of purpose later today, but possibly, with one eye on the US election they may prefer to wait until the Decmember Meeting to do so. If that is the case we might find a lower stock market and a stronger US$ this time tomorrow. Have a good day.

Economic data highlights will include:                                                                              

Wed: NZ Current Account, Australia New Home Sales, WBC Leading Index, UK CPI, PPI, RPI, EU Trade Balance, US Retail Sales, NAHB Housing Market Index, Business Inventories, EIA Weekly Crude Stocks Change, FOMC Meeting – Interest Rate Decision/Press Conference/Statement/Projections

Market moves, in brief:

FX: DXY 93.10 (+0.05%)

Bonds: US10Y; 0.681% (+0.98%), German 10Y; -0.481% (+0.08%), UK 10Y; 0.215% (+10.57%), Australian 10Y; 0.876% (-0.36%), NZ 10Y; 0.618% (+1.78 %), China 10Y; 3.119% (-1.31%)

Stock Indices: DJI; +0.01%, S+P; +0.52%, NASDAQ; +1.21%, EUStoxx50; +0.47%, FTSE100; +1.32%, Shanghai Composite; +0.51%, ASX200SPI: +0.86%

Metals: Gold $1954 oz (-0.01%), Silver $27.13 oz (+0.02%), Copper $3.0560 lb (-0.39%), Iron Ore $127.49 per tonne (NYMEX) (-0.40%),

Oil: WTI $38.41 pb (+2.97%)

CURRENCIES
EURUSD: 1.1846
Res  1.1870  1.1885  1.1900
Sup  1.1825  1.1810  1.1795
USDJPY: 105.45
Res  105.70  105.95  106.20
Sup  105.25  105.00  104.75
GBPUSD: 1.2889
Res  1.2920  1.2965  1.3005
Sup  1.2855  1.2810  1.2760
USDCHF: 0.9081
Res  0.9110  0.9130  0.9150
Sup  0.9070  0.9050  0.9030
AUDUSD: 0.7300
Res  0.7320  0.7340  0.7360
Sup  0.7280  0.7260  0.7240
NZDUSD: 0.6711
Res  0.6720  0.6735  0.6750
Sup  0.6700  0.6685  0.6670
INDICES / COMMODITIES
S&P.fs: 3394.93
Res  3415.00  3435.00  3455.00
Sup  3380.00  3360.00  3340.00
DJ30.fs: 27910.00
Res  28020.00  28185.00  28360.00
Sup  27785.00  27640.00  27500.00
SPI200.fs: 5943
Res  5960  5980  6000
Sup  5925  5905  5885
XAUUSD: 1954.53
Res  1965.00  1975.00  1985.00
Sup  1945.00  1935.00  1925.00
XAGUSD: 27.14
Res  27.35  27.50  27.65
Sup  27.00  26.85  26.70
WTI.fs: 38.45
Res  39.00  40.00  41.00
Sup  38.00  37.00  36.00

Trend Table: September 16, 2020

Expect another choppy and rather aimless session ahead of the Fed announcement. I would not be carrying too much risk into this meeting as there is likely to be a decent spike in asset prices, one way or the other, on the announcement of future policy. The DXY does seem to be underpinned but that could turn very quickly, so stay nimble!  To avoid any US$ exposure, EurJpy does look heavy according to the trend table.

As per my trade outlook on Telegram yesterday…AudUsd could be building a reverse S/H/S formation, where a break of the neckline at the 0.7345 high would open a target of 0.7470 – just a thought, and would need an accommodative Fed to see it happen (see chart below).

EURUSD USDJPY GBPUSD USDCHF AUDUSD NZDUSD
1 Hour Turning Lower? Possible Basing Formation Turning Neutral Turning Neutral Turning Lower Neutral – Turning Lower?
4 Hour Neutral – Turning Lower? Turning Lower Turning Higher Turning Neutral Turning Neutral Turning Neutral
1 Day Turning Neutral Turning Neutral Neutral – Turning Lower? Turning Neutral Turning Neutral Turning Neutral
1 Week Possible Topping Formation Turning Neutral Possible Topping Formation Possible Basing Formation Up Possible Topping Formation
DXY S+P ASX200 GOLD SILVER OIL_WTI
1 Hour Neutral – Turning Higher? Neutral – Turning Lower? Turning Neutral Neutral – Turning Lower? Neutral – Turning Lower? Up
4 Hour Turning Neutral Turning Higher? Neutral – Turning Higher? Turning Neutral Turning Neutral Turning Higher
1 Day Neutral – Turning Higher? Turning Lower Neutral Turning Neutral Turning Lower? Neutral – Turning Lower?
1 Week Possible Basing Formation Possible Topping Formation Turning Neutral Overbought – Turning Lower? Up – Overbought Turning Neutral
EURJPY EURGBP GBPAUD AUDJPY EURAUD AUDNZD
1 Hour Down Neutral – Turning Lower? Neutral – Turning Higher? Neutral – Turning Lower? Neutral – Turning Higher? Turning Neutral
4 Hour Neutral – Turning Lower? Turning Lower Turning Higher Neutral Turning Neutral Turning Neutral
1 Day Turning Lower? Neutral – Turning Higher? Turning Lower Turning Neutral Turning Neutral Turning Neutral
1 Week Possible Topping Formation Turning Neutral Turning Neutral Possible Topping Formation Turning Neutral Possible Topping Formation

AudUsd – Hourly Chart

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