Dow traders turn attention to FOMC

This week’s charge higher by the Dow Jones has ground to a halt, just before the Federal Open Market Committee statement.

From the open on Monday, the Dow had managed to add just under 300 points after suffering the previous week. The tail-end of last week saw the equity index dip below both the 50- and 100-day moving averages. However, after Monday’s resilience, both of these levels have been surpassed.

Expected at 6pm (London time), the FOMC’s statement is one of the key tools used by the Fed to outline its thinking on the current economic landscape, and its strategy for handling it. Going into today’s comments, the markets are expecting a further $10 billion cut to the current US debt purchasing scheme. This would take its monthly purchases down to $55 billion from the original $85 billion. The resilience of the markets to this reduction in stimulus must partially be attributed to the time that the Fed spent forewarning traders that this was going to happen.

Clearly, today’s comments will go a long way to giving equities a sense of direction. The 16,450 region could once again form a hurdle the Dow will need to clear.

Wall Street chart

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