Investors Cautious Before Today’s FOMC Announcement

U.S. markets were lower overnight and Asian markets are lower or range bound this morning. The Federal Open Market Committee (FOMC) has begun its two day policy meeting and will decide whether or not to scale back its asset purchases by later in the day.

They have enough good reasons to begin sooner than later. Even though they could start now, there is a strong possibility they will begin in March 2014. We have seen a upward revision of the GDP and stronger than expected labor numbers, however they might want more information before pulling the trigger. Hence the reason why March is a better bet for them to begin the taper of their QE program.

STOCKS

The DJIA hovered around the flat mark most of the day. The blue chip index eventually closed lower by 9.31 points at 18,875.26. 3M (NYSE: MMM) gained over three percent after announcing they were increasing its quarterly dividend by 35 percent.

The S&P 500 fell 5.54 points to finish at 1,781. Telecommunications led the sectors lower and materials were the big gainers on the day. Please recall, the S&P 500 has 10 sectors that comprise the index. The Nasdaq Composite was also down for the day. The tech heavy index lost 5.84 points to close at 4,023.68.

Asian markets are mixed today, however the Nikkei is up sharply by nearly 1.50 percent at the time of this report. We are back above the 15,500 level for the first time in two trading sessions. There are rumors that Prime Minister Shinzo Abe will reveal new growth strategies to boost the highly waited for structural reforms in Thursday’s speech. This rally also saw the yen weaken further through 103 versus the U.S. Dollar. This helped exporters rally on the day.

The Shanghai is virtually unchanged, lower by 0.4 percent at this time. An economic report on housing prices was released today showing that new home prices have hit a record high despite Beijing’s attempts to cool this market down.

The Australian ASX 200 is down by 5.39 points to 5,097.80. the market is trading in a narrow 20 point range as investors are focused on RBA Governor Glenn Stevens. He is happy with the interest rate cuts but remains worried with the strong Aussie while above 0.90 versus the U.S. Dollar. The AUD/USD recovered a bit from its 5 month low last night. See the currency section below.

CURRENCIES

AUD/USD (0.89038) tested the support area of 0.888 yesterday then recovered. While we are below 0.90, we remain bearish which is what the RBA wants for this exporter nation. Bulls remain hopeful that 0.888 will continue to hold. We could be range bund a bit, but remain under strong selling pressure while in this area.

EUR/USD (1.3778) has seen resistance at 1.38/3825 holding. The structure remains strong and no weakness is evident as 1.371 has held on the downside. We are bullish to target 1.38 and 1.3825 again. USD/JPY (102.947) rose back from the trend line support to come back up close to 103.00. We remain in a sideways range from 101.50 towards 103.98/99.

COMMODITIES

Gold (1231.80) is consolidating. A break below 1220 is bearish and a break above 1250 is bullish. We will wait and see.

Silver (19.90 has resistance at 20.47 which has proven stiff. While below that we remain bearish.

Copper (3.35) keeps going higher. We have resistance near this area which needs to break to move towards 3.40 or we will dip to 3.30 and 3.25.

TODAY’S OUTLOOK

Today is all about the FOMC. What will they do? We will find out later today so stay tuned. We will bring it to you. The U.S. will release housing starts and building permits today as well.