Investors Cautious Ahead Of The FOMC Meeting

Asian markets were volatile and mixed today as investors are cautious before the start of the Federal Open Market Committee (FOMC) policy meeting today. The meeting will conclude tomorrow.

Investors are watching the FOMC very closely as many feel the Fed will cut back on its asset purchase program by $10 billion to $15 billion a month. They are also expected to remain firm on their dovish monetary policies to stimulate job growth and a softening economic growth. Also, former Secretary of the Treasury Larry Summers withdrew his bid to become the next head of the Federal Reserve Bank. This sent U.S. markets higher and points to the waning influence of the President Barack Obama over the Senate.

STOCKS
The Nikkei 225 was flat today after returning from a long weekend. Exporter stocks got a boost as the yen weakened to 99.10 at one point. The Shanghai Composite was down a mere 0.6 percent today and the Kospi, in South Korea, also lost 0.6 percent. The S&P/ASX was virtually flat. Would seem investors are sitting on the sidelines for now. I hope we get no shocks from the FOMC meeting.

U.S. markets finished up overnight even as they fell back from session highs. Very important that the DJIA finished up 118 points to close just below a critical level at 15,500. The index finished at 15,494.78. We need a break and daily close above to avoid a dip to 14,000. For right now, the Dow is on track for its best month since January 2013.

The S&P 500 rose nearly 10 points to close at 1,697.60. The index was above a key level at 1,700 briefly during the day. The NASDAQ Composite, reversed and lost all it initial gains to close down 4 points at 3717.85. The Russell 2000 has now hit an all-time high.

CURRENCIES
The Dollar Index (81.20) has been softening and is now at key support. Will it hold? We saw profit taking in the EUR/USD (1.333) yesterday at 1.3385. We see near term resistance now at 1.3350. Look for range trading today in a tight pattern until after the FOMC meeting concludes tomorrow. Please see the below chart.

The Aussie’s recovery has been very impressive from 0.8896 but the AUD/USD (0.9296) has met some resistance at 0.9340. We could e trapped in a consolidation pattern before moving higher again. The USD/JPY (99.26)is ranging, in a medium term way from 98.50 up to 100.51. The yen did weaken a bit overnight which is good news for Japanese equities.

COMMODITIES
Copper (3.2135) has fallen a bit after hitting a high at 3.28 yesterday. We are concerned as the Shanghai has been falling and could range trade from 3.20 to 3.25 for some time before testing 3.20 then 3.10.

Gold (1313.60) has weakened even further. We are on track to target 1275 then 1200. Silver (21.89) is also weaker and below 22.50. We are looking to target 20.00.

TODAY’S OUTLOOK
All eyes on the start of the FOMC meeting. Watch for comments as the day progresses. As far as data goes, the U.S. is releasing its CPI number so we will be looking at inflation, so will the Fed as they consider how much, if at all, to taper back.