FOMC minutes were lack lustre for the markets today, as the market jumped, then fizzled on the back of them. While starting off with a bang and talking up the fact that the economic outlook had strengthened, it seems the risk of a trade war with China is weighing more on the economy than anything else, with investors and traders looking spooked. Inflationary pressure is expected to rise as well in the next 12 months, but is not expected to impact current forecasts for future rate rises. The inflation bit does seem a bit tongue and cheek when you look at the fact that the USD has been devaluing against most major currencies so in reality inflationary pressure may be brought about by currency changes, especially if China decides to manipulate it to punish the US for its recent comments. For the most part though what was said, was what the markets expected, hence the fizzling out in markets after they were released.
The S&P 500 took notice of the FOMC minutes and quickly chucked them to one side as it continues to find itself under pressure from the bulls and the bears. Things have not been this volatile for a number of years and there is no clear direction at present for the equity markets. Why does seem to be very realistic though is resistance at 2664 looking stronger than ever before, but at the same time you also have the 200 day moving average creeping up the charts and putting pressure on the S&P as it gets forced between these two major levels. With the market failing to close below the 200 day moving average it's certainly not a strong bearish signal, while at the same time not closing above 2664 is not a clear bullish signal. Instead the market is waiting to see which one of these levels does crack before looking to make a move, and I feel that the bears may take this with further rate rises likely to put pressure on equity markets, coupled with Trumps erratic behaviour with global super powers.
For me the other key focus today has been of course the USDCAD which has been very bearish for some time. On the charts the clear head and shoulders pattern has been driving the markets lower and the technical's are still looking strong, even after today's small bounce of support at 1.2548. Yesterday I also talked up the CPI risk which today was as expected, so markets were more likely to remain bearish in the short term. I am still focused on the USDCAD moving down to the 1.2046 level, but at the same time cautious that it could take some time. Any close below the 1.2548 level should be treated as further bearish extensions. I would also watch the 200 day moving average as dynamic resistance in the market as today's brief bullish push did show some weakness when it came to touching it.
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