26 January 2010 at 20:57 GMT
The market not wanting to commit directionally today as tomorrow we have Obama's first State of the Union address on tap tomorrow as well as a fresh monetary policy statement from the FOMC. The Bernanke "reappointment crisis" seems to be fading as a theme as more thorough polls of the Senate suggest that Mr. Bernanke will survive for now, even if with the slimmest margin of approval since the days of Mr. Volker (who is ironically suddenly very present). Still, the waters are very choppy here for the Obama administration, as can be seen from the anti-bank broadsides Obama's team has been launching of late, and almost daily hints at strong new policy directions. The thrust of these hints? Having your cake and eating it, too, it seems. Mr. Obama wants to announce new efforts at middle class tax relief and indirect stimulus, but the newest indication is that he also wants to freeze government outlays for the next three years. Let's see how well he manages tomorrow's performance.
Technical developments of note:
A basic risk barometer like the US S&P 500 posted a long-legged doji on the day, with fairly strong attempts at a sell-off and then a rally both rejected as the day essentially settles unchanged. This scene was more or less repeated in the likes of AUDUSD. We note that the market is looking at some very interesting swing/pivot areas ahead of tomorrow's event risks.
USD Index - closing the day a bit stronger from levels earlier in the US session and right smack on the 200-day moving average once again. This is an obvious focus.
AUDUSD - tested the important Fibo in the 0.8960 area - this is a key pivot zone, with a close below possibly setting up significant further consolidation, to the 0.8735 potentially, and even to the 200-day moving average currently just above 0.8500.
Chart: AUDUSD
As noted above, the pair testing a key pivot zone for more downside today. This area remains important for the sessions ahead.
USDJPY - survived a test of 0.9050 resistance late yesterday and earlier today survived a near perfect test of the 0.618 Fibo retracement level at 0.8930 (for big wave from 84.80 to 93.80).
GBPUSD - looking touchy again as a bigger test or higher resistance levels we mentioned yesterday was aborted by today's ugly GDP figure. The setup now is more bearish, with the 1.6078 recent low a key trigger for more downside.
Looking ahead
Whatever Mr. Obama and Mr. Bernanke have to say tomorrow, it seems that markets are at a pivot point here, either looking to give the economy and the public powers that be a vote of confidence, or the opposite. It feels like an emotional market. On the equity front, we also have the Apple conference tomorrow, which is supposed to see the announcement of some new tablet computing device. Apple has been an important market bellwether for years, so the enthusiasm or lack thereof that the market shows for tomorrow's conference will be another measure of broader risk sentiment. All in all, tomorrow can almost not avoid being an interesting day. Short term options trades, anyone?
Watch out for the US Weekly ABC Confidence here shortly after the close.
As always, be careful out there.