Fed Moves On 25 Basis Point Rate Hike – Forex Analysis 12/17/15
EUR/USD Sells Off On Rate Hike
During our tradeable hours, both the Euro and the Pound remained extremely stagnant prior to the news which is not much of a surprise. It will be interesting to see how the market takes the rate hike over the next few days. In the history of rate hikes I think this is the first one that was because of not wanting to look like incompetent fools rather than actual data. There is no data that supports the need to hike rates and therefore no future hike will occur anytime soon. As you guys know, earlier this week I made the case for the market to sell the US Dollar after the rate decision. It will be interesting to see if that begins to develop as the week progresses. If every other currency wasn’t in just as bad of a situation I would have expected it by now.
For today I keep the bias open, but unlike the beginning of the week we really have limited manipulation points to choose from. The one upper and one lower point on the EUR/USD are at least quality levels and I would be happy to take any valid stop run from them.
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Pound Reluctantly Caves To The Dollar
The initial sell off of the USD was quickly met by a equally as aggressive reversal back to the downside after the hike. As I look at both the Euro and the Pound today, my initial thought is, “how bad must these countries be to continue giving up ground to the Dollar?” I mean seriously! It took the Fed a year of talking about raising rates a quarter percent before they actually did it. Essentially what they had been saying is the economy is so weak that we cannot even hike rates by a quarter percent without negative effects. It just shows that its really not a question of who is growing, it is only a question of who is falling the least.
At this point directional bias remains open as the market digest the news. We started out the week with awesome manipulation points on both pairs but today we have very limited point to choose from on the Pound. To start the day I do not have an upper level and I have one lower manipulation point I would consider a stop run from.
Forex News For December 17th 2015
German IFO Business Climate 4:00 AM Eastern: Not a big market mover as of late but we have had the occasional 15+ pip spike within the last 6 months so I would not carry into this release. This month 109 is the expected number.
UK Retail Sales 4:30 AM Eastern: This month .6 is the expected number. Historically this has always been a large market mover and something I would not carry a Pound trade into. UK Retail Sales has shown almost no trend in the last 5 years. Overall it has just been consistently random is regards to surprising either direction which makes it a bit more difficult to predict.
US Philly Fed 8:30 AM Eastern: Although I feel like a 15+ pip spike is very unlikely with this piece of news I would not carry it it as it has just been the last 3-4 months of tame price action. Prior to that this was creating quite a sizeable spike. This month 1.5 is the expected number.