Next Up: The U.S. Debt Ceiling

A day after the Fed shocked the markets by not tapering back the asset purchase program, investors are now focusing on the looming U.S. debt ceiling. If Obama and the Democrats cannot agree with the Republicans on how to cap the nation’s debt and borrowing before October, then the U.S. Treasury will run out of options. They will exceed the $16.7 trillion debt limit and possibly send the States into default.

STOCKS
Asian markets paired back early gains to end the last day of this week’s trading on a mixed note. We saw thin volumes, which added to the volatility.

The Nikkei 225 saw choppy trade all day and closed flat. It did hit a two month high at one point as well as a weakening yen helped support the equities. The yen hit $99.30 at one point against the Greenback.

The Australian S&P/ASX retreated from the previous sessions five year high as mining stocks took a hit on commodities today.

U.S. stocks finished near session lows, overnight, as the Dow Jones and S&P 500 came off all-time highs. Investors shrugged off strong economic data and are still digesting the Fed’s decision not to taper.

The DJIA lost 40 points to end at 15,636.35. It traded in a narrow 70 point range all day long. The S&P 500 lost 3 points to close at 1,722.34 after hitting a high at 1,729.86. Both indices are tracing their best monthly gains since October 2011.

CURRENCIES
The AUD/USD (0.9446) fell a bit and could range trade a bit before moving up. We see support now at 0.9400. Please see the chart below.

The EUR/USD (1.3537) rose yesterday and is above 1.3500. Above that level we are bullish for 1.3590 and 1.3600. The GBP/USD (1.6045) fell after a sharp rise. We see strong resistance around 1.6050 and could fall to 1.5900. the USD/JPY (99.245) has recovered a bit and can consolidate for a bit now before testing 100.00.

COMMODITIES
Metals like gold are moving up and oil is falling.

Gold (1365.40) is now testing towards 1375 with a break higher aiming for 1380.00. Above that lies 1400.00. If that level holds we can dip towards 1300 again. Copper (3.3435) is moving up. We see resistance at 3.40 which can hold capping gains for now. If that holds we can retest 3.30. Oil commodities have fallen as Libya has increased output.

TODAY’S OUTLOOK
Markets will be digesting the Fed’s surprise decision all day. We could see markets trade with a great deal of volatility as sever area Fed Presidents are making remarks.