Paul Gallacher
City Trading & Investment
Market Commentary
Fed asset purchases terminated yesterday as planned. Overall, the content of the concomitant comments released by the FOMC was in fitting with FOMC communique throughout the year. However, two comments were worth paying additional attention to: (1) underutilization of labour resources diminishing gradually and (2) risk of below target inflation diminished somewhat. The majority of the market response to the Fed came in the shape of USD strength, while equities and govern-ment bonds finished yesterday’s session with little intraday change.
This morning, a risk-off tone set in just after the European cash equity open, fuelled by underperformance in Italian financial stocks and by political concerns in Greece.
US Q3 GDP came in at 3.5% vs. prev. 4.6% while Core PCE registered at 1.4% vs. prev. 2.0%. Initial Jobless Claims edged up to 287,000 vs. prev. 284,000 and so did Continuing Claims, 2,384,000 vs. prev. 2,355,000.
Intraday Strategy: E-mini S&P
Despite the effort to break out to the upside just after yesterday’s cash equity open, the E-mini endured an almost static pre-FOMC session yesterday. Post-FOMC dynamics entailed heightened volatility, yet limited directionality in the price action, prompting the index to oscillate about pre-FOMC levels for the majority of the latter part of the session. There was yet another false breakout to the upside this morning, catalyzed by the stronger open in European equities. Yet, upside dynamics proved to be short-lived.
Overall, the current range in the E-mini (1962.00 - 1985.75) represents a short-term area of value. Hence, trading opportunities can only be considered upon a significant deviation from the commonly accepted prices. Our plan is to sell into weakening momentum at the upper boundary of the range, looking for a reversion to com-monly accepted prices.
Intraday Strategy: EUR/USD
The EUR declined against the dollar post-FOMC release yesterday, declining 1.75% to the low of today’s session. There is also additional downside pressure for the currency pair in the shape of EUR weakness following lower than expected regional inflation numbers from Germany.
Our plan for the day is to sell into a pullback to the pivot, which is a conservative entry point, yet we feel a conservative approach is warranted in the context of the recent heightened volatility in the FX space.
Technical Analysis: Nasdaq and DJIA
Nasdaq and DJIA are recovering from the lows of the session at the time of writing this report.
Technical Analysis: Bund and US 10-year T-note Futures
Upside pressure in the Bunds today - partly on safe haven inflows, partly due to lower inflation data from Germany. US 10-year treas-urys are pushing higher in tandem.
Technical Analysis: GBP/USD and USD/JPY
JPY and GBP are relatively stable against the USD currently, taking into account the large scale moves in yesterday’s session.
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