Surprising Initial Fed Reaction But Trades All Good


INTERESTING - So an interesting initial reaction to the Fed statement. On the whole, the statement didn't offer all that much in the way of anything new. However, the Fed did mention the need to monitor international developments. Certainly from this line, it could be assumed the Fed would be more inclined to hold off on a rate hike for now. This would be a more dovish development and one that would seemingly open additional profit taking on USD longs. And yet, the initial reaction has been largely USD positive, and it seems the markets are less focused on this language and more comfortable focusing on the language that suggests the Fed remains on course for a hike over the coming months. As bullish the Buck as I am, I am not entirely convinced the initial market reaction is the appropriate one, and believe we could still be at risk for additional USD declines in the sessions ahead.

GOOD STUFF - The market needs to now consider the possibility the Fed doesn't even make a move in 2015, in light of the central bank action abroad, and this should in turn weigh on the Buck, at least a bit. But I won't complain about Kiwi underperformance, with the USD bullish reaction post FOMC only intensifying against Kiwi after the RBNZ came out shortly after with a more dovish outlook. I had warned of this possibility over the past several weeks, and had established the long AUDNZD position just over 1.0500 in an effort to take advantage. So far, so good. In fact, all trades are running well at the moment, with my SPX500 short getting going, and EURCHF long well in the money. I haven't had a lot of success trying to pick a top in USDCAD, but after getting stopped at cost on the 1.2450 short from earlier this week, I am back at it with a fresh USDCAD short position in play above 1.2500. Let's see how it all pays out.

Still risk for short-term USD declines ahead. Via @joelkruger

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