Morning Dew - 20 March 2014

Laying Out the Groundwork

US Federal Reserve slashed its bond purchasing program to $55bn or by $10bn as its FOMC meeting concluded last night.

In addition, officials predicted their target interest rate would be 1% by the end of 2015 and 2.25% in the following year. This means the Fed will keep the rate from rising until 2015.

A wide range of data will determine when the Fed will raise the rate as 6.5% unemployment rate tie-in has been considered as obsolete.

According to Janet Yellen, there will be some considerable time between the end of stimulus – expected to be this fall – and the first rate increase, interpreted by her as “six months or something like that”.

US CAD Improved

US stocks fall as a response to the Fed’s statements. The longer the rates at the low level, the more upbeat the market will be. Now that the Fed has laid out the groundwork and narrowing the uncertainties, the market naturally falls as it knows that the days of easy monetary policy are numbered

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US current account deficit was trimmed to US$81.1b in 4Q13 from US$96.4b, better than the expected US$88b.

Technically Speaking...

JCI bounced off its support area around 4,800 and ended the day higher at 4,821.

Recent peak-turned-support at 4,791 will be the nearest key support line for JCI, whereas another support will be at 4,665 as this was also the prior resistance-turned-support.

Next resistance is seen at 4,917, ahead of 5,000 which is the psychological resistance and subsequently the projection target at 5,063. While still a long-shot, the distant 5,653 price objective is now within radar.

Volume continued to tick down, as well as MACD and RSI which were also turned lower.

Day Ahead

Stocks may take another step back this Thursday as the Fed laid out the groundwork for its monetary policy. As stimulus is bound to end this year, this would mean the next will be on interest rate hike. Expectation of rising interest rate will take some wind of out of JCI’s sails. Still, the JCI will remain supported by Jokowi’s presidential candidacy.

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