Fed Downloads QE 3.0, SPX 7% Away from Record Highs

Bernanke went all-in on a third round of asset purchases, committing to a program of mortgage-bond purchases until there is a significant improvement in hiring. The US dollar tumbled after the announcement. The moves are likely to consolidate as Asia-Pacific trading wraps up for the week. As for Wednesdays Premium Insights from Ashraf, 1 of 2 longs in EURUSD hit the 1.2980 target, while the other remained unfilled. Both USDJPY shorts nearing their targets. 1st of 2 longs in GBPUSD hit 1.6160 target, while the other is in progress nearing its own objective. See more details in final paragraph.

The FOMC voted to buy $40 billion per month in mortgage-backed securities for an unlimited time or until the jobs market gains strength. If the labor market does not improve substantially the Fed said it could further increase asset purchases or deploy other tools.

In his press conference, Bernanke said he hoped the move would encourage businesses and individuals to invest and grow the economy.

The market was indecisive for a half-hour after the announcement and then quickly began to unload US dollars. The euro, Australian and Canadian dollars all gained about a full cent. Gold surged $40 to a six-month high of $1772.

USD/JPY was buffered by yen-selling on the crosses due the rise in risk appetite but touched as low as 77.13 the lowest since February. The Fed action increases the likelihood the BOJ will introduce further easing next week.

The Fed sparked a 1.6% rally in the S&P 500 to a fresh four-year high.

Expect markets to now move in a more straight-forward fashion to economic news good news will be good for risk appetite and vice versa. The first test will be Fridays US report on August retail sales.

Inflation also threatens be a major trading theme and could add additional upside to gold prices. The PPI report on Thursday posted its largest one-month increase in three years.

Other economic data was downcast as initial jobless claims rose to 382K compared to 370K expected, although some analysts blamed effects from Hurricane Isaac. The US fiscal deficit for August was also higher than expected.

The lone item on the calendar in Asia is Japans industrial production at 0030 GMT. The consensus is for a 1.2% m/m decline.

The latest Premium Insights from Ashraf give technical and fundamental rationale the calls made. The latest version saw 1 of 2 longs in EURUSD hit the 1.2980 target, while the other remained unfilled. Both USDJPY shorts nearing their targets. 1st of 2 longs in GBPUSD hit 1.6160 target, while the other is in progress nearing its own objective. CADJPY is 20 pips away from its final target. Golds 1st long is less than $3 away from final 1775 objective, while the 2nd long is nearing its target. US crude oil entry of 95.50 was not filled before breaking past our 97.70 objective. AUDUSD was unfilled. DIRECT ACCESS TO THE EXISTING CALLS found here: http://ashraflaidi.com/products/sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

-AB