SP500 holds gains after PBOC liquidity injection

In the first of several Central Bank meetings today, the Federal Reserve provided further insights into the timing of its tapering of asset purchases and around its future rate hike cycle.

Trading floor 3

The FOMC will likely announce the start of tapering at its November meeting and that it will end some eight months later in mid-2022 - slightly earlier than consensus expectations. 

Like the June FOMC meeting, movement in the Feds "dots" was notable, indicating a more aggressive hiking cycle than expected. "Lift-off" is projected to commence in 2022 and will be followed by three hikes each in 2023 and 2024, higher than consensus expectations going into the event. 

Behind the FOMC's more aggressive rate hike projections, a lift in the committee's core inflation forecasts. Half the committee are now projecting inflation at 2.3% or higher in 2022 vs. 10% of the committee back in June, bringing into question the Feds narrative that the current rise in inflation is transitory.

Another significant PBOC liquidity injection to shore up the Evergrande debt crisis is supporting risk sentiment in the Asian session today. However, beyond this, U.S. equity traders are left to mull over a mix of higher than expected interest rates (albeit at still low levels), higher inflation, and stronger U.S. dollar against a backdrop of slowing growth. 

Nonetheless, the decline in the S&P500 from the early September 4549.50 high is viewed as a corrective pullback. While the overnight rally goes some way to suggest the correction is complete at this week's 4293.75 low, further evidence is required. 

Firstly in the shape of a move back above the breakdown level at 4425/35, followed by a daily close back within the trend channel 4465/85ish. Until then, a retest and break of the 4293.75 low cannot be ruled out, with risks towards the May 4238 high. 

S&P500 Daily chart

Source Tradingview. The figures stated areas of September 23rd, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from DJIA

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account