Fed Failure

September 22, 2016

If you’re a trader feeling overwhelmed at each of the different central bank narratives all hitting you from polarising directions at once, you’re certainly not alone! The global economic calendar is actually somewhat planned to space out major central bank meetings and decisions, but sometimes a clash is inevitable and we get days like yesterday. Phwor!

“USD Federal Funds Rate: On hold at <0.50% as expected + USD FOMC Statement.”

With rates kept on hold, USD bears were certainly the happier of the two positions. The Dollar dropped as the small chance of a hike that had been priced in was then taken away again, causing the re-pricing that fundamental traders love.

Yellen did signal that rates could well be hiked in December if the labour market continued to improve, but a no decision with rhetoric like that was never going to do anything for USD but to make it fall.

“We judged that the case for an increase has strengthened but decided for the time being to wait.”

With the Fed holding steady in September, we got the final piece that we were waiting to lock into place for our AUD/USD long scenario that we spoke about on Tuesday.

AUD/USD Daily:
Click on chart to see a larger view.

After an initial couple of hundred pip rally, it now looks as though price is definitely going to test this higher time frame resistance. With the RBA shifting their goalposts on inflation and the Fed talking the talk but being unable to walk the walk in terms of hiking rates, we now have a few months until December to speculate on whether they will or wont to end the year.

As per this scenario, the bias is still toward a breakout, but either way those swing highs in confluence with trend line resistance will prove to be the higher time frame zone to manage your risk around in either direction.

USD/JPY Daily:
Click on chart to see a larger view.

On the USD/JPY daily I’ve drawn this big green line at lows to highlight the zone that price has pulled back into. I say zone, because down here we are coming back into a huge weekly level which last saw price action chopping between it back in 2013 when the pair was on a HUGE BoJ inspired tear.

A tear that I remember vividly as I was trading a personal account and long USD/JPY at the lows. I was on the cusp of leaving a job to go travelling when the Bank of Japan stepped in to ensure it happened. But that’s a story for another day! 🙂

Anywayyy, those lows are certainly in trouble now.

USD/JPY 15 Minute:
Click on chart to see a larger view.

I also had to include this chart highlighting the crazy BoJ price action that shows even though things get crazy, technicals are still always resepected. The cliche psych level of 101.000 holds perfectly in both directions during the one crazy session with two central bank inspired lurches in opposite directions. Love it!

And all this ignores the RBNZ decision to leave rates on hold… We’ll cover some NZD charts on the @VantageFX Twitter account so give us a follow and share your own?

Have a great day!


On the Calendar Wednesday:
AUD RBA Gov Lowe Speaks
JPY Bank Holiday: Japanese banks will be closed in observance of Autumnal Equinox Day.

USD Unemployment Claims
EUR ECB President Draghi Speaks
GBP BOE Gov Carney Speaks

Open an ECN Forex account with Vantage FX and take advantage of moves in global currency markets.

Dane Williams – @VantageFX

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