Investors position themselves for ES Fed and ECB action

Investors position themselves for ES Fed and ECB action

By Ric Spooner (Chief Market Analyst, CMC Markets)
30 July 2012

Australian equity investors have followed international market this morning, positioning for increased likelihood of action by the US Fed and the ECB.

However, our market may underperform Friday’s strong rally in US markets. Central Banks have now clearly signalled their intention to act. Investors have adjusted their risk outlook in response to this but we may now be closer to the point where investors will need more clarity on the nature and timing of Central Bank initiatives before pushing markets much higher. Australian investors are also likely to factor in the potential for a stronger Aussie Dollar under a scenario in which the Fed and ECB eases but the RBA does not.

The S&P/ASX 200 index is today likely to test the upper boundary of a zone of technical resistance between about 4205 and 4250. This resistance is formed by the 200 day moving average which is currently at around 4206; an upward sloping resistance line which currently intersects at around 4230 and the early April lows at around 4246.

The ECB and Federal Reserve meetings this week loom as important events for the markets. Although markets do not necessarily expect further action to be announced this month they will be looking for central bank announcements to use language that does not cast doubt on the adequacy of measures to support Spanish and Italian bond yields or the likelihood of further policy easing initiatives.

For further information visit www.cmcmarkets.com

ENDS

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