The markets charge on as there is no change in the Fed’s policy. Investors rushed into stocks Wednesday, sending the Nasdaq Composite Index to its highest since 2000, after the Federal Reserve reiterated its vow to stimulate economic growth with low interest rates. The Dow Jones Industrial Average closed up 95.59 points at 12,690.96. All but two of its 30 components gained, lifting the blue-chip index to its highest close since May 20, 2008. The S&P 500 Index advanced 8.42 points, or 0.6%, to 1,355.66.
The $600 billion QE2 will continue through expiration on June 30th, and interest rates will remain low for an ‘extended period of time’ as we grow at a moderate pace. During his briefing we became aware that ‘extended period of time’ refers to at least a couple of meetings. With the dollar at fresh 3 year lows, not too far off from an all time low in 2008, it is evident that solid growth is more important than a solid dollar. Dropping for the 7th straight day in a row, the longest streak since Dec., the dollar has yet to find a friend as the Euro hones in on the 1.52 top at the end of 2009.
Crude-oil futures settled higher on Wednesday, gathering steam after the U.S. Federal Reserve signalled no change in its monetary policy, said the spike in inflation will be temporary, and that the economic recovery is proceeding at a moderate pace. Crude oil climbed back from an initial drop after EIA reported a build of 6.2 million barrels for the week, which goes to show fundamentals are out the window. Crude oil added 55 cents, to $112.76 a barrel on the New York Mercantile Exchange. The Fed can, however, prevent “higher gas prices from passing in to other prices and create broader inflation,” Bernanke said. He added he saw prices stabilizing soon and providing a relief on the inflation front.
Today’s Important Economic Announcements (GMT)
6:00 AM JPY BOJ Outlook Report
6:45 AM EUR French Consumer Spending m/m
7:55 AM EUR German Unemployment Change
12:30 PM USD Advance GDP q/q & Unemployment Claims
2:00 PM USD Pending Home Sales m/m
4:30 PM USD FOMC Statement & Federal Funds Rate
2:30 PM Natural Gas Natural Gas Storage
10:45 PM NZD Trade Balance
The pound is the best performer on the day after the Q1 GDP data while the yen is down. Following the release of UK Q1 GDP numbers the pound traded higher with sterling the best performing currency so far today. The release was in line with market expectations of 0.5% and stands in stark contrast to the Q4 2010 numbers that showed the UK economy contracted by -0.5%. On the daily the pound broke to the long side and is moving towards its target of 1.67585, from the 50% long at 1.53203. On the shorter term, the pound also hit its long target of 1.66864, from its 50% long which was front run by previous highs and the 50% short line at 1.618. The pound is also coming close to its 2009 high of 1.705, which may be a psychological barrier.
Stop Loss: 1.6692
Take Profit: 1.6744
The dollar sank to an August 2008 low against the euro after the Bernanke remarks. On Wednesday the Euro/Dollar continued increasing significantly with nearly 160 pips. The European currency appreciated from 1.4627 to 1.4795 yesterday, matching the positive Interbank sentiment projection at over +14%, closing the day at 1.4784. This morning the pair rose further up, reaching 1.4882. On the 1 hour chart the new upward channel has resumed, while on the 3 hour chart the upward channel looks good. Break above the nearest resistance and today’s top at 1.4882 may trigger further strengthening of the Euro towards the psychological 1.5. The value of the RSI indicator is positive and climbing, MACD is positive and inclining upwards too, while CCI has crossed up the 100 line on the 1 hour chart, giving overall long signals.
Stop Loss: 1.4824
Take Profit: 1.4880
Gold climbed to a new high as inflation forecasts were projected higher, but downplayed to only be temporary. U.S. silver futures leapt as much as 6 percent and gold futures reached a record high on Thursday, underpinned by a weakened dollar after the U.S. Federal Reserve signalled no rush to reverse its accommodative monetary policy. The dollar index , a measure of the greenback’s strength against a basket of currencies, declined to a three-year low following Fed chief Ben Bernanke’s remarks that the central bank would not scale back its support for the economic recovery any time soon. Gold has followed the misfortunes of the dollar, and will continue to do so in the coming days.
Stop Loss: 1,529
Take Profit: 1,540
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