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US Stocks At Record High Again, Dollar Recovered Ahead Of FOMC

Published 10/30/2013, 04:52 AM
Updated 03/09/2019, 08:30 AM
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US equities continued their up trend overnight with S&P 500 closing at another record of 1771.95 while DOW also caught up and made a record close at 15680.35. Asian equities also followed and opened the day broadly higher with Nikkei up 180 pts at the time of writing. The FOMC announcement today is a major focus and is widely expected that Fed will keep the policies unchanged. Recent communications from the Fed has been quite confusing. Yet, the decision not to taper the asset purchase back in September was generally understood and accepted by the markets. Job market recovery has clearly be slowing and the fiscal drag would further reduce momentum in the economy. It's generally expected that Fed will refrain from dialing back the $85b open ended bond buying this year. Current expectation is that Fed would start to taper in March meeting but markets will keep on looking for clues on whether Fed would further delay the timing.

According to a CNBC survey, nearly 60% of respondents believed that current Fed Vice chair Yellen, the next Fed chair nominee, would be more dovish than the outgoing chairman Bernanke. Also, according to the survey, Yellen was seen to be more concerned with unemployment and less concerned with inflation than Bernanke. Former Cleveland Fed president Hoskins were quoted saying that with Yellen as chair, Fed is expected to have a "weak response to rising inflation" in the future.

Also to be watched in the US session today, ADP employment is expected to show 148k job growth in the private sector in October, comparing to prior month's 166k. Headline CPI is expected to moderate to 1.2% yoy while core CPI is expected to be unchanged at 1.8% yoy.

The dollar index recovered from key cluster support level near to 50% retracement of 72.69 to 84.75 at 78.72. But the recovery is so far weak and kept well below 80.75 near term resistance. The index is also trading well below the 55 days EMA, currently at 80.54. Near term outlook stays bearish. We'd like to point out that another decline, with a decisive break of 78.72, would have larger bearish implication and would pave the way for deeper fall towards 72.69 long term support level.


DX Daily
Elsewhere, Canadian dollar extended recent decline overnight after BoC governor Poloz's comments. He noted during a session with House of Commons Finance Committee that "inflation has persistently been below target". And he warned that "any negative inflation shock would bring us even further away from target". Hence, he said "in that context we decided that we should no longer have an explicit bias towards higher interest rates."

Japan industrial production rose 1.5% mom in September. Other events to be watched today include Swiss UBS consumption indicator, KOF leading indicator; Spanish Q3 GDP, German unemployment, CPI, and Eurozone confidence indicators.

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