Markets in the US took a breather overnight after strong gains as investors become cautious of what message Jerome Powell will send out tonight. The recent worries around inflation have been a hot topic after he suggested there could be a spike in inflation soon. We would expect more detail from him this time and further insurance that there will be no increase in interest rates any time soon.
Longer-term yields continue to whip around at 2020 highs before the COVID-19 pull back. We will be watching this space carefully after the FED meeting. We don’t want to see volatility in this space as it makes many investors uneasy.
Australian Outlook
The XJO is expected to have a soft open this morning, edging slightly lower following similar leads from the U.S overnight. U.S futures sit modestly in the green this morning and coupled with a lackluster night our market is set to have a subdued day.
Markets seem to be holding their breath (except for a rebound in tech overnight) going into the Fed meeting tomorrow morning (AEST). It feels that markets are uncertain as to whether the Fed can once more renew confidence and buying. Lately it has been a disappointment in curbing the bond selling.
Regardless, the medium to long-term projections remain bullish, and the trend remains strong. Yesterday we broke the pennant pattern but face interim resistance at roughly 6850, a level we have bounced from intraday the past couple of weeks.
US Markets
The US was fairly flat overnight, The Dow took a breather after having 7 days of gains. The SP500 closed flat but above the recent time highs resistance level. The Nasdaq continued to edge higher with Tech and Communication services edging higher.
All eyes will be on the FED overnight, they will likely give the market some reinsurance that any inflation coming this year will be only temporary and rates are likely to remain low for a few years.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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