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Bank of Japan Less Accommodative

by Archer Financial Services | Jan 09, 2018

By Alan Bush | Senior Financial Economist at ADMIS     

STOCK INDEX FUTURES

Stock index futures advanced to new historic highs yesterday. Some of the gains were linked to news that U.S. consumer credit posted its largest gain in 16 years.

Outstanding consumer credit rose by $27.95 billion in November from the prior month, when an increase of $18 billion was expected.

Prices are higher today in spite of the weak National Federation of Independent Business Small Business Optimism Index, which fell in December from the prior month.

The 9:00 central time November Job Openings and Labor Turnover Survey (JOLTS) is expected to be 6.038 million.

The computer models that I use, which incorporate leading indicators on the economy, continue to generate bullish signals for stock index futures.

The main trend for stock index futures is higher. 

 

CURRENCY FUTURES

The U.S. dollar is higher due to the increased probability of a rate hike at the March FOMC policy meeting.

The euro currency fell hard yesterday as a result of concerns that the European Central Bank may attempt to talk down the surging euro ahead of its monetary policy meeting later this month.

The euro is lower again today in spite of news that the euro area jobless rate fell to the lowest level in almost nine years. The unemployment rate dropped to 8.7% in November from 8.8% the prior month.

The Japanese yen is higher after the Bank of Japan in an unexpected move reduced the size of its bond repurchase offer by 5% in its latest market operation. This is the first cut in debt purchases since 2016, which sends a signal that the extremely accommodative monetary policy is coming to an end.

The Canadian dollar and the Australian dollar are lower in spite of firming crude oil prices.

Some of the selling in the Canadian dollar is linked to a report that showed housing starts in Canada fell 13.8% in December from November.

In the longer term, the Canadian dollar and the Australian dollar, the “commodity currencies,” are likely to trend higher against the U.S. dollar.

 

INTEREST RATE MARKET FUTURES

Minneapolis Federal Reserve Bank President Neel Kashkari will speak at 9:00.         

The Treasury will auction three year notes today.

The probability of a fed funds rate hike at the FOMC’s March 21 policy meeting is 68%, which compares to 63% yesterday. 

In the longer term outlook, futures are likely to work lower, as it is likely that commodity and wage inflation will accelerate this year and be above the consensus estimates.

This will adversely impact the 30 year Treasury bond futures the most, since the long end of the curve is the most susceptible to the inflation influence.

 

SUPPORT AND RESISTANCE

  

March 18   S&P 500

Support    2739.00       Resistance    2755.00

 

March 18   U.S. Dollar Index

Support    91.590         Resistance    92.450

 

March 18    Euro Currency

Support   1.19550        Resistance    1.20350

 

March 18    Japanese Yen

Support    .88530         Resistance    .89350

 

March 18    Canadian Dollar

Support    .80240         Resistance    .80850

 

March 18   Australian Dollar

Support    .7803            Resistance    .7877

 

March 18   Thirty Year Treasury Bonds   

Support    150^20         Resistance    152^30

 

February 18   Gold

Support    1309.0          Resistance    1325.0

 

March 18   Copper

Support    3.2200          Resistance    3.2650

 

February  18   Crude Oil

Support    61.63            Resistance    62.69 


 For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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