PBoC surprise ahead of FOMC meeting! 

The People’s Bank of China injected $14 billion of funds. 

Market analyst – IFC Markets

Earlier today and in the Asian season, Shanghai suddenly changed the replaced the losses with a 0.2% gain at the closing price. 

After the problems that had arisen in the Chinese construction industry, especially with highly-indebted China Evergrande, China’s central bank injected $14 billion in short-term liquidity to the money market to calm the ongoing stresses and concerns in the markets. Right after this news, the Shanghai index jumped 0.5% before closing from -0.3% to 0.2%. This gain, helped the Chines Yuan also to gain against its crosses.

On the other side of the world, on Wall Street investors are analyzing the published US economic data to guess what we should expect from the FED meeting next week, 21-22 September. Just to review, so far we know August retails sales were much better than market expectation, as a positive sign of reopenings, especially when detailed data showed good recovery in the service sector. At the same time, in the labor market data, Initial Jobless Claims missed the expectations, however continuing Claims eased. The overall outlook was not that bad, especially when we know the Storm and chip shortages were the main reason and can be solved. And finally, yesterday, we also had the Philadelphia Fed Manufacturing Index that increased incredibly to demonstrate America’s economic strength. 

While analyzing these data should give us more information on the Fed’s timing for tapering its asset purchases. The US 10-year Treasury Yield inched higher to 1.345%. On the currency market, DXY that measures the US Dollar against a basket of six major currencies, was down by 0.1% to 92.83.

On the energy market, Oil was softer today, while concerns about US crude Oil production are still there. US crude oil and Brent Oil, both decreased respectively 0.3% and 0.2% to $72.12 and $75.50. 

 

Considering all mentioned news and data, in the Daily chart, and as we can see in the below figure, SP 500 entering the caution mood, with a flat OBV trend line and RSI at 49, both with slow descending interests. For now, it is still following the old road map, falling all way towards 50 DMA and rebound from there, as we can see, it had the exact same reaction after touching the 50 DMA a few days ago. On the flip side, if by more risk in the market, the index starts to fall, we have to check the 4,400 and 4,200 as its key support levels, under 50 DMA at 4,440. 


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