FOMC Meeting Starts Asian Markets Volatile

The Nikkei 225 rebounded quite strongly today thanks to a weakening yen. Still many stocks were down as investors brace for a cut in the U.S. asset buying program. The question we are now asking is: How much of a cut if at all? We are expecting policy to remain the same.

The Federal Open Market Committee (FOMC) is now in the middle of their monthly policy meeting and a decision about tapering is due later today. After that, we will get ben Bernanke’s remarks. We are expecting the FOMC to taper back its asset buying program by $10 to 415 billion a month while keeping the key rate at zero.

STOCKS
The Japanese benchmark has rallied 1.85 percent to its highest level since July 25 thanks to a weaker yen. The yen traded at $99.30 against the dollar up from its high on Monday of $98.45. This helps the exporter nation sell its good overseas.

The Shanghai Composite fell below 2,184 to it a one week low on the heels of weaker than expected housing data out of China. The Australian S&P/ASX fell even more today as it is coming off Tuesday’s five year closing high. Weaker commodity prices are to blame for this recent correction. The South Korean benchmark lost 8 points today as well.

The U.S. indexes traded up overnight. The DJIA climbed 34.95 points to end above 13,500 at 13,529.73. This is now a three day winning streak and is now tracking its second best monthly gain of 2013. The S&P 500 rose 7 point to 1,704.76 as it is now back above the 1,700 level. The NASDAQ Composite jumped nearly 28 points to end at 3745.70.

CURRENCIES
The EUR/USD (1.3352) the Euro is bullish ahead of the FOMC decision. We see resistance at 1.3350. The Yen (99.230) rose towards 100 today then weakened a bit. We are ranging from 98.00 to 100.01 in a medium term picture. Please see the below chart.

The GBP/USD (1.5901) is still rising but we see resistance at 1.6000 which could be formidable. If that holds we could retreat towards 1.5750 and then 1.5700. The AUD/USD (0.9344) has also moved up, on a weakening Greenback, we are targeting 0.9500. A break of that area could see parity.

COMMODITIES
Copper (3.222) is stale. We are consolidating near 3.25 before moving higher to 3.3000. Gold (1297.30) is below 1300. We look like we can be testing 1275 at some point soon.

WTI Crude (105.64) has a crucial support level in this area. If that holds we could rebound to 108.00 then 110.01.

TODAY’S OUTLOOK
Only one thing to say here today that will be affecting the markets. FOMC policy meeting. As far as data goes, we will receive U.S. mortgage applications and housing starts today.