Long-end of Treasury Complex Reacts Negatively to Fed Statement
Stock indices managed to eke out a small gain after the Fed
left interest rates alone but offered more details as to how it plans to exit
its stimulus programs.Although the Fed
said the employment situation was improving equity traders failed to take
notice and instead focused on the thought of higher interest rates.Stock indices weakened shortly after the
release of the FOMC announcement when buyers failed to show up.The charts indicate that the way of least
resistance is down with 1096.75 the first target for the March E-mini S&P
The thought of higher interest rates helped pressure the
Treasury complex with the long-end of the market taking the brunt of the
selling. With the Fed slowly exiting from the asset purchase business,
longer-term yields will now be allowed to rise.This put the pressure on the March Treasury Bonds.
February Gold finished sharply higher.The weaker Dollar had little to do with
todayâ€™s rally.Although the Fed implied
that inflation was not an issue, yesterdayâ€™s uptick in PPI started the rally
this week.Oversold factors could be
contributing to the strength and there is always the possibility that central
banks are buying again.The chart
indicates a rally to $1155.50 is likely.This would complete a normal 50% retracement of the recent decline.
Stronger gold and a weaker Dollar helped support March Crude
Oil today.Speculation, however, that
the economy was turning around may have been the biggest contributor to the
rally.Traders could be anticipating an
increase in demand, now that it looks like industrial production is turning
positive.Technically, this market is trading
inside of a retracement zone.A close
over 75.53 will be a sign of higher prices to follow.
The U.S. Dollar erased earlier losses after the Federal
Reserve released its monetary policy statement.The Dollar turned higher after trading most of the day lower after the
Federal Open Market Committee offered more detailed plans to remove excess
liquidity from the financial system.
The Fed also offered commentary on the economy, saying that
deterioration in the labor market is â€śabatingâ€ť.This statement is a reaction to the decline in the unemployment rate
earlier in the month from 10.2% to 10.0%.The Fed did reiterate, however, that it will keep its benchmark interest
rate at a historically low level for â€śan extended periodâ€ť.
Bernanke and his friends also said â€śHousehold spending
appears to be expanding at a moderate rate, though it remains constrained by a
weak labor market, modest income growth, lower housing wealth and tight
credit.â€ťThis statement can be
interpreted to mean the Fed still wants to see people getting jobs, consumers spending
and banks lending money.
The March Euro erased its earlier gain after the release of
the FOMC statement.This move was
short-lived causing a two-sided trade into the close.Technical issues could help support the Euro
over the short-run, but investors are still monitoring sovereign debt issues in
Spain, Portugal and Greece. Any new bearish
developments regarding Euro Zone debt issues could pressure the Euro.
The March British Pound held on to its gains after the Fed
released its monetary policy statement.The British Pound was buoyed this morning by a better than expected
initial claims report.
Profit-taking and overbought technical conditions helped
support the March Swiss Franc most of the day.Shortly after the Fed announcement, the Swiss Franc weakened, but thin
buying interest led to a quick turnaround.
The Fed news did very little to the March Canadian Dollar,
which remains rangebound.The Canadian
Dollar received most of its support the strong rallies in Gold and Crude
Oil.Continue to look for a range bound
The March Japanese Yen remained rangebound although the
Dollar strengthened versus the Yen after the Fed announcement.With the Fed outlining its exit strategy,
Japanese interest rates are once again becoming the lowest in the world.This is helping the Dollar gain against the
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