Oct. 9, 2014 – Equities Pump as USD Dumps on Fed Minutes
As expected the Fed Minutes match the Statement
The Fed Meeting Minutes were a mirror of the statement as I thought yesterday, sending stocks running to the upside while pushing the USD down. This new normal will probably be around for a long time from what I see. The Fed will talk about raising rates just like the BOE and never do it for the same reason the BOE will never raise rates. They wont be able to afford the interest on all the new government debt they have racked up over the last decade. With the so called independent central banks really being controlled by the elites, rich, politics, take your pick, they will never let rates rise and eventually the rest of the world will be at near zero as well and all will be stuck having to chase yield in stocks because there will be absolutely none in having a savings account.
Below are a few quotes from the minutes stating their concerns. As you read them ask yourself. Just how are they going to change/fix that?
Participants also discussed how the forward-guidance language might evolve once the Committee decides that the current formulation no longer appropriately conveys its intentions about the future stance of policy. Most participants indicated a preference for clarifying the dependence of the current forward guidance on economic data and the Committee’s assessment of progress toward its objectives of maximum employment and 2 percent inflation.
The answer? You guessed it. More of the same. Supposedly the US is doing better if we take the data at face value, however if they are still so concerned, something is not right. I wont even get into what impact this Ebola thing will do if its gets more out of control than it is.
On to the charts
I will be looking at the EUR/USD as a first push with the almost two days of chop before the break up on the Fed minutes. They did make the 60 pip pullback after the three pushes up so that adds more probability of seeing the second today. Having said that the levels are a little sketchy with daily ones at 1.2698 and 1.2685. There is also the Asian lows if they hold since we already have a 38 pip Asian range. It would be better if they at least hit stops below 1.2712 but as we know they don’t hit stops as often during London like they do in the NY session. I will consider a short from the highs but need something clear to change my bias. With this push due to the Fed and Europe being clearly the dirtier shirt they may not have the desire for pushing the Euro higher.
The GBP/USD had the same move for the third push yesterday so I would prefer to be looking for the reversal here but it too came from a two day chop telling me they may just not do it. If the USD weakness does hold up this will go for extended pushes. The hourly close above yesterdays highs during the London session will tell the story for me. Otherwise the potential for the reversal trade from the highs is there but does carry a bit more risk. If I do get the short entry during London I will treat it as aggressive and get the entry close to the highs waiting to see if they show conviction for a quick exit. The best short will be from 1.6174 or just above while I will be open for the long at 1.6129 where it has confluence with the 200 EMA. There is the chance they make the turn upward from 1.6140 but I would prefer they run at least the 50 pips trying to push out weak holders first.
The push to the upside on the EUR/JPY yesterday shows that they weren’t so keen on pushing it down so I will be more open on direction on this pair today. It is a intraday push up after the fake out to the lows so does have a slight higher probability for the next move up but would be much nicer if they showed the conviction above 137.86 yesterday or this morning. If the USD weakness against the UJ catches up today it will drag this pair with it to some extent if the EU cant make the break to the upside. The best level I see for the short is at 137.80 but if they want to run stops they will push above yesterdays highs first. Otherwise 13758 is valid for the long since the Asian range is wide enough. If they do a clear trap there during London, preferably leaving the Asian box closer to the highs I will take the long.
Forex News Today
The calendar starts off with German Trad Balance expected to drop significantly showing Germany is getting more effected but the down turn along with the Russian sanctions over Ukraine. This will most likely be close and priced in barring a big miss. Later the ECB releases its Monthly Bulletin which will likely resemble their last meeting just like the Fed. What will be interesting is to see the dissenters to Draghi’s bond purchases as I noted in yesterdays commentary. He is losing support so this has potential to move the Euro today.
The UK has their interest Rate and Asset Purchase Program which should be a non event. They cant raise rates and have no need to do more asset buying right now.
The US has Thursday Unemployment claims (non event) but could see some volatility around the speech by Fed Member Bullard. However Super Mario also has a speech later in the day they will likely be waiting for. If I am in a trade I will want my stop at break even and widen my take profit just in case.
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