Equities Traders Eye FOMC on Wednesday

Global equities benchmarks have started the week in a broadly positive tone with risk assets trading higher ahead of the headline event risk this week. The US Federal Reserve meets for its September FOMC meeting tomorrow and the event is drawing plenty of market attention. While the Fed is not expected to adjust its policy at this stage, the market will be keen to learn any further details regarding the recently announced shift in inflation targeting.

Fed chairman Powell announced at the recent Jackson Hole symposium in the US that the central bank will now allow inflation to run above its 2% target, instead looking for an average of 2% inflation, before making any upward rate adjustments. This development has raised the barrier in terms of rate hikes and as such, the US Dollar has come under pressure, allowing for higher equities prices. Of particular note this week will also be the updates the Fed will make to its economic forecasts. While the Fed’s overall message is likely to be one of caution with regard to the outlook, there are some upside risks for the economic forecasts in light of the better than expected economic data we have seen in the US recently. With this in mind, equities markets might find themselves struggling for direction if any upward revisions are made to the growth/inflation forecasts.

Technical Views

DAX (Bullish above 12916.11)

From a technical viewpoint. Despite breaking down beneath the rising channel last month, the DAX has continued to drift higher and is still holding above the 12916.11 level, keeping the near-term bias bullish towards the next key upside level at 13744.70.

S&P500 (Bullish above 3115.75)

From a technical viewpoint. The S&P is still trading below the bullish trend line which was recently broken. However, with the 50dma providing support, the bullish view remains intact and will only change should price move below the 3115.75 level, which would open the way for a deeper correction lower.

FTSE (Bearish below 5922.4)

From a technical viewpoint. The FTSE is once again testing the upper line of the recent bearish channel which has framed the correction from post-lockdown highs. While price remains within the channel, and capped also by the 50dma, the near-term bias remains bearish with the 5626 level the next support area to watch.

NIKKEI (Bullish above 23273.6)

From a technical viewpoint. The NIKKEI is struggling to get back above the rising channel support line, having recently broken beneath the structure. With the 50dma supporting, the near-term bias remains bullish for now. To the downside, any break lower will turn attention to the 21758.9 support next.

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