Risk Off Trading As US Data Released

U.S. markets are now down four straight days and the S&P 500 has fallen below 1,700. Investors are timid as they face confusing comments from Federal Reserve (Fed) officials and as the debt ceiling looms. These concerns spilled over to Asia this morning as Asian markets were highly mixed.

There are growing concerns that the U.S. borrowing limit will not be met at the end of the month. Congress has a deadline on Monday to approve a resolution to extend the deadline or not. They are debating whether or not to raise the debt ceiling.

Investors are also getting a plethora of confusing statements from Fed Official as well. Nobody seems to have a straight answer as to when the fed will reduce their asset purchase program. New York Fed President William Dudley made comments supporting last week’s surprise decision. These contradicted Dallas Fed President Richard Fisher.

Risk Off Trading Today

The S&P/Case-Shiller Home Price Index released yesterday, which is composed of 20 metro areas’ home prices saw a rise 12.4 per cent in July from last year which fell in with expectations, however the monthly price increase was 0.6 per cent from June , which was below the anticipated rise of 0.8 per cent.

Another factor causing concern of the delicate condition of the US economy among market players was the 30 yr mortgage rates rising to 4.5 per cent from 3.3 per cent since January.

Ensuring traders kept risk-off positions was the consumer confidence index which fell to 79.7 for September, a 4-month low, from the 81.8 figure released in August.

Stocks

The Nikkei 225 was lower again today as the yen continues to gain momentum. We are hovering around $98 against the dollar. This is way below high at $100.60 earlier this month. The Kospi in South Korea also fell however the Shanghai Composite rose 1 percent in trading. The Australian S&P/ASX broke its range bound trading cycle to jump 1 percent to over 5,820. We are close to the five year high achieved last week, which was 5,300.

U.S. markets were in the red overnight. The DJIA lost nearly 67 points to close at 15,334.59. The S&P 500 lost 4 points to close at 1697.42 and the Nasdaq Composite, beat the trend, to close up nearly 3 points at 3768.25. The Russell 2000 Small Cap Index moved higher. Small caps are up nearly 27 percent for the year.

CURRENCIES

The AUD/USD (0.9370) has fallen a bit and below the support at 0.9400. We could be range bound for some time at this level. We have strong support at 0.9300, which is a double bottom. If this holds, expect a fresh bounce. See the chart below.

The EUR/USD (1.3465) has fallen a bit but has broad support at 1.3300 which should hold. In the bigger picture we are trading from 1.2700 to 1.3500. The GBP/USD (1.5982) has met stiff resistance at 1.6070. We are aiming to test 1.5900. USD/JPY (98.691) continues to press lower as the yen gains momentum. We are aiming for 98.00 at this point.

COMMODITIES

Silver (21.72) has fallen a bit and is bearish. We are aiming to test 21.00 but could be range bound from 21 to 23 for a period of time. Gold (1325.20) moved higher on the hope for new demand out of India. Still, outlook is uncertain while 1375 holds.

Copper (3.2575) moved up smidgen. We are range bound from 3.2400 and 3.3200.

TODAY’S OUTLOOK

Markets are now event and risk driven and today will see plenty of data. Especially out of the United States where data has been going soft. The U.S. will release mortgage applications, durable goods and new home sales today. We also get oil inventories.