Markets Give Back Most Or All FOMC Gains March 20, 2015
Gains Against The USD Evaporate Along With Most Equity FOMC Push
I have to admit that although I did expect a retrace of the FOMC gains against the USD I did not expect it the next day. However this does show that although the Fed wants us to think they will or at least have a chance to raise rates there is much more in my view that says they wont and probably never will. The reason is as many have been pointing out in the last few days there is real risk of a repeat of the 1937 style slump where equities lost 50% within the year because (what they think now) the Fed raised rates to fast, 7 years after the start of the Great Depression when the economy was showing signs of recovery.
Ok so if we think about this for a second we know that the Fed has been doing nothing but keep the stock markets from plunging, there is literally nothing they can or will do for the man on the street because they simply cant. They are bankers there for the sole purpose of helping bankers thinking or more like hoping the bankers do the right thing to help the man on the street and therefore the economy. Well one only has to look back in history to see that this dream has never been the case and never will be. Where does this leave us then? IMHO the Fed has just about nothing left but verbal intervention. They cant raise rates but they can sure threaten it. They can run another QE program which they might do but I have some doubts on that since the diminishing returns for all previous QE programs have shown they are a failure. The juice has been spent.
So to put this in context, if they are afraid of raising rates in fear of a stock market crash but they keep saying things are better so we need to raise rates depending on the data that is getting worse, what is left? To put it simple, A Managed Crash or as managed as it can be with HFT algos in the drivers seat. Good luck with that.
EUR/USD Drops All FOMC Gains
The EUR/USD did make a nice three push move for 300 pips to the lows yesterday again leaving it open on direction for today. The Euro is still fundamentally weak so the probability for a move down is better but the question is will they do it today. It would be best to see conviction below 1.0616 to give clear direction but I will be open for a short from the 1.0701 level where the most confluence is. They may only test the Asian highs before pushing down but I will need more than usual to take a higher risk trade there. Otherwise I will be open for the long at yesterdays lows while cautious of the levels being tested just below.
GBP/USD Gains Evaporate
While the GBP/USD did hold some of the FOMC push it still retreated back into the drop on bad UK news before the FOMC release making direction questionable at best today. The best shorting level considering proximity is up at 1.4835. Even though the 1.4793 is valid it is weak so would be best to see them test during Asia to help probability for a turn there during London today. Otherwise I will be open for the long at 1.4713 but prefer to see them run stops to yesterdays lows.
EUR/JPY Drops Back With EU
The EUR/JPY is in the same situation as both EU and GU today so I will be watching 129.17 for the short and 128.40 for a long during the London session. It would be best to see some conviction first so I will be cautious taking trades without it.
Forex News Today
The calendar is rather bare today other than some PPI figures from Germany expected to get above zero. I have my doubts it will create much of a push since they will likely be digesting recent bigger events.
There are a couple of Fed member speeches late in the day so they could get interesting but as long as they keep the rate hike talk at a minimum then they shouldn’t do much.
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