All Eyes Watching Fed This Week March 16, 2015
Markets Will Likely Be On Hold Until After Fed Meeting This Week
This is not something I am going to be holding my breath on since I do expect the Fed to stick to their guns on rate increases. At the very least getting a token .1% test if not the full quarter point just to see what happens in June. However the wording of the statement later this week will be key in determining just what if anything they have planned. Most are waiting to see if they remove the term “patience” increasing probability of the rate increase in June. Having said that as we can clearly see via equities that as soon as the markets think they are really serious the markets tank showing just how addicted they are to the Feds free money or ZIRP. The term being between a rock and, well another rock seems inadequate right now. The two choices that Yellen has are outlined by Mark St.Cyr below and I do feel he has a good chance of being correct.
They stick to their guns, signal the intent to raise rates sending the global economy and markets into a tail spin of unraveling carry trades, currency wars and quite possibly a full-blown currency based Armageddon.
The question here is why would I think they will stick to their guns? The answer is self preservation. If admitting they screwed the pooch on everything thus far it will bring the “audit the Fed” boys to the forefront and whether they get it or not is a different story but the last thing they want is the fight. The other reason is they need some wiggle room when the global slow down does come around to bite them in the butt and Im sure they would prefer to have at least a half point they could split in two in order to buy more time before launching yet another QE program. I have to admit that it sure is looking like the Feds days may be numbered. They wont go down without a fight though.
EUR/USD Drops Below 1.0500 Again
The EUR/USD dropping below the 1.0500 level last Friday would be more significant if they were able to have the daily close well below but they ended up holding almost to the pip. Thats why this pop up during Asia this morning don’t surprise me even though its odd to see this time of day. This does add probability of this being a false move to test buyers but we will have to wait and see what happens later during London. I expect that if this level holds they will run stops before a push down but since we do have some questions regarding what the Fed will do later this week it wouldn’t surprise me if they hold this range until they at least get a leak from someone inside.
The push down does make me more bias for the short today but I will be more open for the long if they run stops to the lows and I see there arent any willing sellers to push it down. The best level to short is at the current Asian highs but would be best to see them push down and give London some room to manipulate before running to at least test the lows.
GBP/USD Makes Third Push to Next Daily Level
With the GBP/USD making the third push last Friday we should be seeing a reversal today. However already pulling 70 pips from the lows is a little concerning along with the slight conviction having more probability of being false this morning. If they cant confirm the conviction during London I will be more open for the short if they cant find buyers at the Asian high while also open for the long and a deeper reversal from the 1.4716 level or preferably lower with a stop run to the lows Friday.
EUR/JPY Runs Third 200+ Pip Push
At this point the cleaned way to look at the EUR/JPY is having seen the third push even though price movement is still well beyond the ADR. I will be more open on direction since it seems they are having trouble pushing above Thursdays lows last week but a pus up to 128.32 wouldnt surprise me in the least. Considering what I mentioned about the Fed meeting above the probability of holding the range is better. I will be looking for the long at 127.03 while open for the short at 127.66 if it holds this morning with a move lower before London open.
Forex News Today
The calendar is quiet today until the US Industrial and Manufacturing Production releases. Baring a large miss I doubt these will do much and will need a disappointmet well below zero to get them thinking the Fed wont or cant raise rates. Later Super Mario has a speech and if history tells us anything he will do a typical Euro pump saying everything is going as planned but when he admits the risks are high to the downside the dump is likely unless they are weary the Fed wont show more leaning toward rate hikes later this week.
Asian session traders have RBA meeting minutes to watch out for tomorrow along with a BOJ Press Conference that could get the Yen running.
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