Investors Cautious Ahead Of The FOMC Meeting

Asian markets moved lower on thin volume after a midafternoon rally. Investor attention is now on the Federal Reserve meeting scheduled for tomorrow.

Former Treasury Secretary Summers has bowed out of contention to be Federal Reserve Chairman. His move sent a positive reaction through the markets. This leaves Janet Yellen as the front frontrunner for the position. She is a well-known policy dove. So markets/investors expect her to keep Bernanke’s easy monetary policies.

After the move, U.S. stock futures jumped one percent while the 10 year Treasury note climbed. This sent rates lower and the dollar hit a two week low versus the yen at 98.53.

Japanese markets were closed for a holiday.

STOCKS
The Australian benchmark was up 0.3 percent after paring earlier gains. The market was briefly above 5,252 to hit its highest level since May 2008. The Aussie is now at a three month high versus the Dollar at $0.9370. The other markets were mixed. The Kospi was up 0.6 percent and the Shanghai Composite lost 0.2 percent.

The U.S. markets saw their second week of gains. All the major averages were up over three percent. The DJIA was up 3.04 percent for the week, the NASDAQ was up 3.69 percent and the S&P 500 rose 3.37 percent.

For the day, the DJIA closed up 75.42 points to end at 15,376.06. The S&P 500 rose 4.57 points to close at 1,687.99 and the tech heavy NASDAQ Composite rose 6 points to end at 3,722.18.

CURRENCIES
The AUD/USD (0.9328) has risen sharply and can test 0.9400 and then 0.9500. Please see the below chart.

The dollar has weakened against the Euro after former Treasury Secretary Lawrence Summers quit the race for Fed Chair. Janet Yellin is now the frontrunner. The euro is now moving from 1.3200 to 1.3410 ahead of the FOMC meeting on Wednesday. The GBP/USD (1.5951) is also up and is testing the key 1.6000 level. We expect that to hold and see a dip toward 1.5700. The USD/JPY (98.863) has fallen sharply on a weaker dollar. We see support at 98.00 which we expect to hold and see a rise back towards 100.00.

COMMODITIES
Gold (1329.30) recovered from 1304.00 as the dollar weakens. We need to rise past 1350 to bring back the bulls. If that happens, we can test 1425.00.

Copper (3.2235) is moving up past 3.22. We see more resistance 3.26. We are bullish above 3.20.

TODAY’S OUTLOOK
All eyes are on the FOMC meeting set to begin September 18. We will be listening closely to comments as well as watching for the tapering of the bond buying program. Today is rather weak on data as there are no big releases.