Shares trade nervously ahead of the Fed

The XJO is expected to edge lower on open this morning following slight pullback in the U.S overnight and their flat futures this morning.

Yesterday our market continued the selldown, settling on 7,200 key support. This largely reflects the U.S as both markets are being cautious heading into the Fed rate decision tonight.

The Fed will almost certainly hold rates, however, as usual markets will be looking for future guidance on monetary policy.

If 7,200 breaks, which could happen today if our market wants to de-risk further into the announcement, then 7,150 and 7,100 remain key support. If however, the news is received positively overnight, then our market should rebound with 7,250 and 7,300 roughly the next key resistances.

US Markets

US shares closed moderately lower overnight, with each of the three major indices finishing in the red. Prices were strongly lower at points, but rebounded to close almost flat for the session. This came after mixed economic data, with stronger than expected building permits, but fewer than expected housing starts. Additionally, Canadian CPI announced overnight was much stronger than expected, triggering more inflation concerns. This led to the US yield curve rising. US markets now look ahead to tonight’s Federal Reserve meeting, where they will search for any signal around potential rate rises, as well as how long rates are likely to stay at their highs. We might expect the next directional move for markets to come on the back of tonight’s meeting.

Two of the eleven sector groups of the SP500 closed higher overnight, with no sector making meaningful gains. Energy stocks were the worst performers overnight after their recent strength.

Technically the SP500 fell below the key support at 4,450 overnight. Though it tried to retake the level by the close, it was unable to. The index is now setting lower peaks and troughs in the short-term, suggesting it may keep falling. A potential downside target might be the 4,350 level, that was previously support. While the technicals are looking bearish, a positive reaction to tonight’s Fed meeting could change this.

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