Banks the key to today's trading
With the benefit of 24 hours hindsight, the strong reaction to yesterday’s FOMC meeting by many world markets looks very like a short term trading reaction. Traders, particularly in the currency markets seem to have been caught out by the Fed’s ongoing caution and this triggered a round of stop loss induced volatility. The clue to this market action was the fact that the very large moves in the hours following the FOMC announcement have not been followed through.
Many of the world’s markets, including the US stock markets traded within the previous sessions range last night. Early indications are that the Australian market will follow suite, with a soft start followed by an inconclusive day’s trading inside yesterday’s range. However, this is not a certainty. Traders will be alert to the possibility that the strength of buying for the major banks could follow through today pushing the ASX 200 index closer to the much anticipated 6000 level.
Softer oil prices last night suggest the market is finding it hard to ignore the ongoing build up in US inventories and the fact that the economy can’t use what’s currently being produced. This may be a negative for the energy sector today and is a reminder to the broader market of excess capacity and weak inflation in global economies.
For further comment from CMC Markets please call 02 8221 2137.
Frequently Asked Questions about this Article…
The strong reaction to the FOMC meeting was largely due to traders, especially in the currency markets, being caught off guard by the Fed's ongoing caution. This led to a round of stop loss induced volatility, causing significant market movements.
The ASX 200 index nearing the 6000 level is significant as it represents a key psychological milestone for investors. It indicates strong buying interest, particularly in major banks, which could drive the index higher.
Softer oil prices are impacting the market by highlighting the ongoing buildup in US oil inventories. This suggests that the economy is unable to consume the current production levels, which could negatively affect the energy sector and remind investors of excess capacity and weak inflation globally.
Traders should be aware that while there was a strong initial reaction to the FOMC meeting, the large moves were not sustained. They should remain alert to the potential for continued buying strength in major banks, which could influence market direction.
The Australian market might experience an inconclusive trading day because early indications suggest a soft start, with trading likely to remain within the previous session's range. However, this is not guaranteed, as market dynamics can change quickly.
The buildup in US oil inventories affects global economies by contributing to excess capacity and weak inflation. This situation can create challenges for the energy sector and broader market, as it indicates an imbalance between supply and demand.
Major banks play a crucial role in today's trading as their buying strength could potentially push the ASX 200 index closer to the 6000 level. This buying activity is a key factor for traders to watch.
Investors can contact CMC Markets for further commentary by calling 02 8221 2137. This provides an opportunity to gain more insights into market developments.
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