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Fed Fails To Hike Rates For 55th Month – September 18th 2015

For the 55th time in a row the Fed fails to hike rates yet again. Its now official…the US economy is so weak that it cannot even sustain a .25% rate hike! Are you kidding me? I wish I was but the fact this latest no hike sends an even stronger message about the economy than if they would have hiked rates. Initially the markets took this lack of a rate hike as a good thing and US equities took off to the upside aggressively. After a major surge up they turned around just as quickly and closed near their lows. Even since the August 24th massive sell off in equities I have been talking about the 50-70% retracement area and today will be no different.

Historically what separates a short term correction from a market down turn is what happens when the market retraces the first drop. If we see the market begin to sell off from this area again and break new lows then major continued downside becomes not just a possibility but rather a probability. With the major rejection of higher prices today I believe tomorrow will be very interesting. Should we see a significant sell off tomorrow then hold on to your hat for Monday because it could get bumpy.

S&P500 Chart - September 18th 2015


USD Causes Default Euro Strength

Today’s move up in the Euro as well as the Pound didn’t have much to do with either of those two currencies. The move was 90% USD weakness after the failure to hike rates. In yesterday’s September 17th Fx market commentary I pointed out that with some people expecting a rate hike the USD would weaken even if rates stay the same and that is exactly what happened. 

With the move up you might be super biased towards further continuation up on the EUR/USD. At this point I’m going to continue to remain open on direction and trade any stop run from a pre-selected manipulation point and here is why? Take a look at the S&P. Notice the shift in the market from positive to negative. If we see heavy risk aversion take hold today’s move could shift as quickly as it occurred. Because the possibility is open I will keep my directional bias open as well.

EUR/USD Chart - September 18th 2015

GBP/USD Spikes On No Hike

My commentary for the Pound is pretty much identical to that of the Euro. Like the Euro, 90% of the move up in the Pound was due to the failure to hike. Also like the Euro I feel like keeping an open directional bias is the smart play. What this means is taking any valid setup from any of the pre-selected manipulation points listed in the chart. 

With the movement we are seeing in equities it is going to be important to pay attention to risk aversion or risk appetite in the market tomorrow. For those of you in the overnight session I would recommend watching equity futures and look to see how the markets are correlating. As we go into the 9:30 US equity market open knowing whether or not the market is selling off will be important as it will cross correlate to the forex market.

GBP/USD Chart - September 18th 2015

Forex News For September 18th 2015

For the pairs that we trade we have no major news. If you trade a CAD based pair then make sure to watch out for CAD CPI at 8:30 AM Eastern.


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