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Market Outlook: Doves rule the Fed roost

Re-thinking long-established forecasts
January 31, 2019

As we warned yesterday, not only did the Fed’s FOMC keep rates unchanged at 2.25-2.5 per cent, reiterated that they would be data-dependant, but also possibly hinted that its balance sheet adjustment process could be halted. Many see this as a massive U-turn, the central bank bowing to market pressure in Q4 2018 and feeling the heat from President Trump.

Yesterday German economy minister Peter Altmaier forecast that in this calendar year economic growth in his country would almost halve from what he predicted as recently as October: from 1.8 per cent to just 1 per cent, a blow for the EU’s biggest economy. Blaming it on ‘headwinds’ (which include Brexit), he’ll certainly get to feel another this morning because December retail sales data collapsed by 4.3 per cent from the previous month, taking the annualised fall to 2.1 per cent.

DAX 30

The commodity channel index turned down – and will hopefully stay this way as the index struggles at the 50 per cent retracement resistance area.

 

SHORT TERM TRADER: Small short at 11180; stop above 11400. First target 10600.

 

POSITION TAKER:  Square.

FTSE 100

Miners getting a boost yesterday as Brazilian giant Vale closes another 10 mines that use the same tailings dams as that at the Brumadinho disaster.

 

SHORT TERM TRADER:   Short at 6905; stop above 7005. First target 6600.

 

POSITION TAKER:  Short at 6895; stop above 7045. First target 6600, and then probably an awful lot more.

S&P 500

Cooing noises from the Fed and decent results from Facebook despite last year’s scandals have had little impact here so far.

 

SHORT TERM TRADER:  Short at 2666; stop well above 2700. First target 2450.

 

POSITION TAKER:   Square.

BRITISH POUND/US DOLLAR

The MACD still bullish as the US dollar sags a little on the Fed’s comments.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Long at 1.2860; stop below 1.3000. Target 1.3250.

EURO/US DOLLAR

Back up towards the upper edge of the range of the last 3 months. According to Graeme Leach at Macronomics research consultancy Target 2 German balances at the ECB stand at €1 trillion, while Italy’s stand at -€0.5 trillion reflecting opposing claims on the central bank.

 

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

GOLD

Rumours and stories flying about Venezuela’s gold and Russian appetite to diversify away from the US dollar into gold bars. Not sure.

                            

SHORT TERM TRADER:  Square.

 

POSITION TAKER:  Square.

Nicole Elliott is a long-standing member and Fellow of the Society of Technical Analysts and has taken over the IC’s trading coverage.  She is regularly interviewed and quoted by the financial media, is a conference speaker, and author of several books on charting.