Even though yesterday not many expected a tapering of the Quantitative Easing program, it happened. Federal Reserved announced that they will cut the monetary easing program from 85B to 75B. Now everybody says that this decision was semi expected, to say it like that, by the market and that is why the reaction was like it was.
We actually think that the real explanation of the market reaction is that even though the FED cut the QE with 10B dollars, but equilibrated the balance with the fact that they will keep the interest rates as low as possible even after the unemployment rate had touched 6.5%. The main banks are expecting low interest rates until late 2015.
They are going to reduce even more the program but this will happen if the economic data will be accordingly to their forecast. The inflation rate is below FED’s target and they will keep a close look over it during the next period.
All these together have appreciated the US dollar and triggered a drop in Gold’s price, but it also triggered big rallies for the indices.
Today the main economic releases were the Current Account for the Euro Area, which rose at a surprisingly 21.8B; UK’s Retail Sales which grew by 0.3% and the Unemployment Claims from USA which went up to 379K.
Up next the markets are still waiting for the Existing Home Sales, the Philly Fed Manufacturing Index and CB Leading Index.
After all of these, the EURUSD is trading around 1.3670, where it has encountered a powerful trend line. On an intraday interval a break above 1.3700 could trigger a rally targeting 1.3750, but a continuation of a drop under 1.3650 would be a good selling signal targeting 1.3600.
USDJPY jumped to 104.20 from 102.70, after last night decision. The current trend might continue only if the local high will be broken, but we would carefully look also after a corrective move under the 103.75 low. AUDUSD is currently trading around 0.8840 but the pressure seems to be on the downside.
Dow Jones Industrial, on features, rallied above 16000 and continued to 16100. At this point the consolidation is fragile and the up move might continue targeting 16200.
XAUUSD bumped into 1200$ per ounce, but it seems that bears are still trying to break this level. Silver is heading for 19$ per ounce with no local support to stop the fall.
Crude Oil is knocking at 99.00$ per barrel and the bulls power seem to keep growing, so we expect a breakout above this level during the next trading hours. Brent Oil has encountered a good resistance at 110.35$ per barrel but it might not be enough to stop its rally. A break above this level could target 111$ per barrel.
Do you remember our yesterday’s article What are investors expecting from the FOMC meeting? Our option expired today outside the range we mentioned for the EURUSD and we cashed in the full payout.