Hawkish FED does little to damage equity appetite

Article by ForexTime

The US economy is making waves as usual with Yellen’s speech to the Senate today showcasing that the FED is expecting to make some large moves this year. One of the key points from Yellen was that the FED could indeed (as expected) lift rates more than a few times this year, but left it more open to the as and when it could indeed happen. The FED also expects its balance sheet to shrink further as well, which will see it unwinding positions slowly over time that it accumulated during the Global Financial Crisis. Yellen was also quick to point out that she will indeed complete her term as the head of the FED, and the following appointee is likely to be a republican hawk if reading of the current state of anything is to go by. So we could be in for some very interesting monetary policy in the long term once things come into play.

For the S&P 500 those comments have not been enough to dampen traders confidence in equity markets under the new Trump administration with the S&P 500 climbing to record highs for a third consecutive day.  The 20 day moving average seems to be the only support level the market is at least respecting at this stage as it continues to trail it up the charts. With movements like these you normally get psychological levels around the 50 and 100 mark, so in this case I would expect resistance to appear at 2350 and also 2400. In the event of a bearish turn then 2306 would likely be the markets first point of call for defence, but at present it’s hard to stem the tide for US equity markets as they continue to make large gains.

Australian markets are also under heavy pressure from traders at present as the AUDUSD continues to find itself pausing for breath after going through a strong bearish phase on the back of positive global risk sentiment. USD strength has thus far not  caused the market to dip lower, however the AUD has a full schedule this week with consumer sentiment and unemployment figures due out both of which will have a large impact on the AUD.

What is clear for the AUDUSD is that the market continues to struggle past resistance at 0.7680 and if there is to be any further momentum it may need some help from Australian economic data to finally break the barrier. Certainly one of the key things here is also how the 20 day moving average is treated by the AUDUSD, as the bulls may look to use it as a point to push from to gauge appetite for movements higher. Expectations are that it will eventually push through, it’s just a matter of time – the amount of time though is the big unknown and any pressure that does push through will likely have to be sustained rolling into the next day.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.


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