Overnight, absent major economic news, US markets extended Monday’s gains as investors are looking towards today. New Fed Chair Janet Yellen is set to testify before Congress for the first time.
We will be watching her debut performance closely today looking for signs whether the Fed is going to alter its plans to wind down its QE program. The fed had been buying $85 billion in Treasuries and mortgage backed securities in an effort to stimulate the economy. In December they announced they would cut $10 bill a month in purchases, and followed that again in January with another $10 billion cut. They hope to end QE by middle of 2014.
STOCKS
Overnight, the DJIA rose a marginal 7.71 percent to finish the day at 15,801.79. The S&P 500 was up nearly three points and closed at 1,799.84. We are just below the key and psychological level of 1,800 once again. The tech heavy Nasdaq Composite also finished higher for the day. The composite rose 22.31 points and ended the session at 4,148.17.
Asian markets are mostly higher at this time with the Australian ASX leading the way. At the time the Australian benchmark is 0.7 percent higher as it is extending gains. This comes after a private data release showed business confidence rose in January. Other data showed that housing priced rose 9.3 percent in Q4 2013.
In New Zealand the NZX 50 is up 0.4 percent, the South Korean Kospi is up 0.5 percent and the Taiex in Taiwan is up nearly 0.3 percent. On mainland China, the Hang Seng is extending gains today up 0.2 percent. The Shanghai Composite is also higher this morning as it is extending Monday’s gains. The market is currently up 0.36 percent.
The financial markets in Japan are closed today for a public holiday.
CURRENCIES
EUR/USD (1.3666) has broken the bearish channel and moved higher. We have seen the bearish momentum come to an end with the break above 1.366. If we break above 1.3750, we will establish a nice rally.
USD/JPY (102.159) failed at 102.50 and moved lower. This is a bearish move and we can now dip towards 100 then 98 over the coming sessions. We remain bearish while below 103.50 and in danger of falling off further. GBP/USD (1.6420) had to break above 1.6415 to extend the rally towards 1.6450/1.6480. Price action now will set the course for the next several days. A failure at 1.6450 could bring in selling pressure and cause a dip lower.
COMMODITIES
Gold (1284.80) has shot above 1275 as physical demand from China has supported the price. We are now targeting 1295 and then 1300 while above 1275. A close back below 1275 will cause a downward correction. Silver (20.25) is moving towards the key resistance at 20.50. A break of that level targets 21 at first then 21.50. Copper (3.2095) failed at 3.25 but has key support at 3.20. We could see sideways movement up to 3.25 for a period of time before the next move.
TODAY’S OUTLOOK
New Federal Reserve Chair is set to testify before Congress for the first time later today. Watch for insights on her plans for the winding down of the asset purchase program. She will also, in all likelihood, refrain from giving employment targets as when the Fed will change key lending rates. This is the beginning of a new era and the markets will be watching, keenly, for how she will steer the fragile economic recovery.