Markets Bounce On Bad US Data March 17, 2015
Can Fed Lose “Patients” As US Data Gets Worse?
I have to say we have a conundrum brewing when it comes to the Fed meeting tomorrow. While I would expect that they hold their ground on losing the term patients in the statement there are growing concerns that they may not be able to and equities have shown that yesterday. Thats not to say there is no where but up from here but it does bring the question of any real possibility of even the token rate increase they keep promising (or at least hinting of a promise LOL). What comes to mind is the previous larger changes to the statement in the recent past with the “relying on data” added several months back. This leaves them open for changes at a whim if data disappoints, and since the beginning of February this year it has had the worse start since they began tracking data disappointments. Check the chart below.
All things considered with any rate increases being data dependent they just may drop the “patients” term from the statement just to show resolve but with data disappointments like this I would have to say there is about a snowballs chance in Hades for a rate increase in June unless we start getting some astronomically good data releases in the very near future. If they keep the “patients” terminology then its all over but the QE.
EUR/USD Pulls Above 1.0500
As I expected the EUR/USD pulled back to test the highs from Friday, which is typical with an event approaching like the Fed meeting tomorrow. Nobody wants to be the tall blade of grass at this point. Notice how they blasted the breakout traders first though. Good stuff. I never like those trades with the level being non existent but sure is interesting to see them play the typical game.
Today I will be open on direction even though we do have an intraday push upward. The chance for a breakout here is low unless they are convinced the Fed will not change the statement, if that is the case then they may at least test a break to the upside even though I have my doubts. The best level for the long is down at 1.0526 but I will consider a short from 1.0618 as well.
GBP/USD Makes Full Reversal
With the GBP/USD making the full reversal yesterday, only pulling back to the Thursday lows showing no conviction it will be best to remain open on direction here as well. The safer levels will be at the extremes of 1.4850 for the short and 1.4716 for the long but if they do want to try for a second intraday push there is a decent chance they do so from 1.4768. However as usual, caution is required taking entries in the middle of a third push chop.
EUR/JPY Still Running With EU For Now
I dont anticipate that the EUR/JPY will stop running with the EU as of yet with all eyes watching out for the Fed right now. There could be a surprise from the BOJ this morning but I expect even they will keep the rhetoric low waiting to see what Yellen does tomorrow. The reversal was nice as they also hit the breakout traders good before the move but again they will need to be convinced the Fed wont change the language in order to test the upside today. Again the safest trades will be at the extremes of 128.75 for the short and 127.03 for a long.
Forex News Today
News releases start with Inflation data from Euroland with expectations remaining negative. I do see the better chance of a disappointment but it will need to be substantial to get them moving before tomorrow and will only test the lows. There is also German and Euro Zone ZEW Economic sentiment expected to rise substantially and should be close since the QE program being a disappointment in its first week hasnt been factored in yet.. If all of these releases are better than expected there is a chance for the break upwards but its small the way I see it.
The US has housing data expected rater flat and with these figures being less significant these days there will need to be a big surprise upward to trump all the recent disappointments while a smaller miss down may cause some USD weakness.
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