The Fed concludes its two-day policy-setting meeting on July 31, and many are expecting the language to indicate the Fed will be simply waiting on the incoming data to determine whether they will add or subtract stimulus. The ECB also has its monetary policy announcement this week, along with the key GDP and non-farm payrolls reports coming out of the U.S.
Equities: The SEP13 E-mini S&P 500 (CME:ESU13) is down 4 points this morning to 1682.50, while the SEP13 E-mini Nasdaq is down 9 points to 3061. The E-mini Nasdaq seems strong as it is trading very close to the highs of 2013. We believe the Nasdaq could head higher this week, especially if the Fed’s announcement does not indicate they are thinking about tapering the stimulus in September. Our next market profile target on the upside for this market is 3103. We might not see a big move in either direction before Wednesday afternoon’s U.S. FOMC policy announcement.
Bonds: The SEP13 30-year U.S. bond futures (CBOT:ZBU13) are down 14 ticks to 134’09. We believe the overall trend of this market seems to be down, and would not be surprised to see the bonds dive lower this week, especially if the two key data points of GDP and payrolls come out higher than forecast. We think the data will largely determine the bond market’s direction this week. We don’t think the Wednesday Fed statement will be any different than Bernanke’s most recent speech in July, which started the downtrend in the U.S. dollar and the rally in stocks. 134 is our key pivot level, and our next downside target is 132’24.
Currencies: The SEP13 Japanese Yen has been the high flier as of late, and today is up again to 102.02. The Yen has gotten a boost recently from above forecast inflation numbers coming out of Japan. We believe the Yen’s rally is not through, and are watching our next market profile target up above at 103.29. We have 101.60 as the first key support level. The SEP13 U.S. Dollar Index futures (NYBOT:DXU13) are up slightly to 81.88, but will likely be quiet before the big onslaught of data this week. We are curiously watching the USD, as we believe it could rapidly reverse course and head higher if the GDP and jobs numbers this week prove to be much higher than the economists’ forecasts.
Commodities: AUG13 gold futures (COMEX:GCQ13) have been very resilient this month, not being able to stay below the $1,315 support level recently. Gold seems to be consolidating at the beginning of the week around the $1,330 level. Gold is in a very interesting spot right now, almost exactly in the middle of the longer term range of $1,200 to $1,500. We believe gold could be shaping up to be in more of a range trade than anything else for the near term time horizon. We believe gold might have a floor at around $1,295 and a ceiling of $1,395 over the next month. Gold’s Achilles’ heel might be stronger economic data, so if we get a big jobs report on Friday, gold might find some selling. However, if the data is in line with forecasts or even lower, we could see another run towards $1,350. OCT13 sugar futures found some buying this morning, trading up .43 cents/lb to 16.91. We have our next upside target for sugar at 17.38.