Your Friend LLC

The FOMC is expected to announce no change in the 0.25% target rate today.  They may acknowledge that the economy continues to be on a recovery path citing the higher Retail Sales and employment despite the harsh weather.  Given the still high unemployment and the unwinding of stimulus measures they are likely to keep the rates steady for an “extended period of time”, but one has to wonder if they will define further the word “extended” at some point.  The Fed needs to be careful to not paint themselves in the corner by keeping extended as part of the language.  The Fed normally does not raise rates until NFP is adding on average 225k-250K for a three month period.  Counter to that is rates are at 0.25% which are historically at record low levels. As a result, when accomodation starts to get unwound, moving to 1% continues to keep rates accomodative.

An action that they may look to do is possibly raise the discount rate by 25 basis points in the attempt to take further abnormality out of the market. On February 18th the Fed raised the rate to 0.75% and the spread to the target Fed Funds rate rose to  0.5%. That was the spread that existed from August 2007 to February 2008. Prior to that the spread was “normally” at 1.0%.  Should the Fed decide to raise the discount rate to a spread of 0.75% it might be thought of as just another step toward normalcy.

The last time the Fed did raise the dollar rose on the news.

Click here to view the embedded video.

THE GBPUSD has continued it’s push higher reaching a high of 1.5182 in the process. The pair has moved back down and has 1.5151 now as intraday support for the pair. 

There was a triple high off the hourly chart at 1.5194.  The high for the week extended to a high of 1.5206. The high from Friday came in at 1.5216.  All these levels are target levels to the upside.

The high for the week is 1.3777.  The high last week was 1.3796. Longer term the resistance remains at the 1.3852-1.3873 area (see chart below).

Greece removed from watch list of S&P.

Upward pressure on Canadian Currency not just commodities. He implies the economy is chugging along as well.  He also says that the strong fiscal position of the Canada is helping to support the C$.

The data this morning supports that notion as well. Manufacturing Sales rose by 2.4% vs 0.6% expected with the prior month also higher at +1.9%.

Upward pressure on Canadian Economy broader than just commodities. Not worried but watchful about Canada Housing market.

He also said will continue with stimulus until the end of the next fiscal year. The fiscal year ends at the end of March.

The 100 day MA is at 90.11 today. THe midpoint of the move down from the Feb 19th high to the low comes in at the 90.13.  The 200 hour MA come in at 90.14. The area should find support.  A break below, however, may lead to some liquidation as the market has tested the 100 day MA on a number of occassions now and eventually, it tires and gives way.

The 1.3735 level was the high from March 3rd.  Yesterday, the market stalled at this level before giving way and moving lower. Today, the price is back up testing this level.   The high reached in the last few minutes found sellers against the level and we have seen the price rotate back down.  The 1.3691 level will continue to be watched below where the 100 hour MA and the old highs and lows through March have increased the importance of the level.   1.3704, the high from March 8th is also a level to watch below. 

The FOMC rate decision is later today. That and perhaps the London fixing at 12:00 noon today will cause some fireworks (there is some talk that EURGBP may be pressured and this may keep a lid on the EURUSD).  At the moment we are just range trading.

Click here to view the embedded video.