Asia Goes South On Fed Fears

Asian markets were largely lower as investors fear next week’s Federal Open Market Committee (FOMC) meeting. There is a good chance they will taper back the asset purchase program then.

This comes after a tepid U.S. session where the S&P 500 broke a seven day winning streak and stocks closed near session lows as investors gear up for the Fed to announce they are pairing back its $85 billion a month asset program at the September 18 FOMC meeting.

There are reports that Japanese Prime Minister Shinzo Abe will raise the 5 percent sales tax to 8 percent in April. He will also order a new economic stimulus package worth $50 billion to soften this impact.

STOCKS

The Nikkei 225 was pretty much flat today. The yen strengthened a bit against the Dollar. The Nikkei is closed Monday for a national holiday. The Shanghai Composite lost 0.2 percent and the Kospi was down 11 points. The market was locked in a range bound trading all day as was the Australian benchmark which was down 23 points.

The DJIA lost nearly 26 points to end at 15300.64. The benchmark is almost within two percent of its record close on August 2. The S&P 500 snapped a seven day winning streak losing 5.71 points to close at 1683.42. The NASDAQ Composite lost 9 points to end at 3715.97 points.

CURRENCIES

The Forex market, at least in the majors dipped a bit overnight, in the bigger picture they appear to be consolidating before the FOMC meeting.

EUR/USD (1.3282) weakened a bit. We appear to be trading sideways for now. The Dollar Index (81.621) is hovering above the support at 81.00 and is also consolidating. The GBP/USD (1.5789) fell a bit yesterday. We remain bullish for now but see resistance at 1.6000. See the chart below.

The USD/JPY (99.64) has risen as of late. We did see some short covering last night but remain bullish for 100.00 with a break above targeting 103.00 and higher.

COMMODITIES

Well we got it wrong yesterday. We thought support levels on the commodities would hold giving us a recovery. That did not happen.

Gold (1325.30) is falling steadily. We are sharply below the support at 1360.00. The doors are open for 1300. Silver (22.03) is also below its key support at 22.50 and can now target 21.00.

WTI Crude (112.72) has risen nicely. While above 112.00 we can target 114.00.

TODAY’S OUTLOOK

We are waiting on Japan to release its industrial output numbers and the government’s economic report. The U.S. will release retail sales and consumer sentiment. We will also see business inventories for last month.