With little surprise, Fed meeting minutes revealed a consensus to end the balance sheet normalisation by end of 2019, even though Fed members are not sure when it is appropriate for the next rate hike.
The minutes reaffirmed the central bank’s dovish stance, and cleared the uncertainty on its monetary policy. Since the Fed started asset normalisation at the end of 2017, its balance sheet has fallen from US$4.5 trillion at its peak to around US$4.02 trillion, pulling out nearly half a trillion dollar worth of liquidity from banks’ reserves via bond maturing.
The message was well received by financial markets. The S&P 500 index climbed 0.2% to 2,784 area, getting closer to a technical resistance level at 2,800. Momentum indicator RSI has entered ‘overbought’ territory of 74%, suggesting the market has temporarily been overbought.
Dollar index rallied 0.24% to 96.4 area after the meeting minutes, possibly due to profit-taking activities as dollar has been heavily shorted use anothedays before the press release. EUR/USD erased earlier gain, fuelled by improved consumer confidence index, and closed the day flat due to dollar’s rebound. Immediate support and resistance levels can be found at 1.130 and 1.137 respectively. AUD/USD extended rally and is about to challenge a resistance at 0.720 and then 0.729.
Gold price has come across a 200% Fibonacci Extension level at US$1,340 and may face some resistance here. Lack of geopolitical catalyst and a strengthening dollar also weighed on its rally. Its momentum indicator RSI has entered ‘overbought zone’ of 75%, suggesting a technical pullback is possible.
Brent Crude oil climbed higher to US$67.0 area, extending an aggregate rally of 34% since 24 December 2018. The American Petroleum Institute (API) report showed 1.26 million barrels build in crude oil inventory last week, less than analyst expectation of 3.08 million. The gasoline inventory fell by 1.55 million barrels, more than earlier forecast of 0.35 million. Both data suggest the build in energy stockpile came below expectation, fuelling the rally in crude oil prices. Brent’s immediate support and resistance levels can be found at US$64.0 and US$68.15 respectively.
Profit-taking activities smashed Asian equity markets at opening, with Singapore’s STI down 10 points, or 0.3% and the rest of Asia broadly lowered as well. Asian equities had a decent rally year-to-date, but may face some selling pressure as optimism has been built in but the pain from cyclical economic slowdown is real too. With major indices hitting key technical resistance and Fed’s dovish gunpowder been factored in, the short-term upside seemed to be diminishing from here.
US SPX 500 - Cash
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