Reflecting On The FOMC Minutes


MORE HAWKISH - The FOMC Minutes triggered an initial reaction in favor of the US Dollar, with the markets taking in a less dovish report. It seems what stood out was the fact that so many Fed members had considered a rate hike in June. The previous rate decision was very dovish in many ways after the Fed downgraded its growth, inflation, employment and rate hike forecasts. So to see a Minutes that still had many members considering a June hike came as a surprise to the market on Wednesday. Right now, we need to pay attention to the EURUSD 1.0713 level. This will be the key level to watch over the coming sessions. If this level is broken, it will likely open the door for a drop back towards the recent 12 year low at 1.0462. If however the market can't take out this level, it will keep the US Dollar correction intact and leave the door open for additional upside beyond 1.1053. I suppose another takeaway from the FOMC Minutes is that it is very difficult to read the Fed.

SCANNING MARKETS - What had appeared to be a much more dovish decision now looks significantly less dovish with the revelation of these Minutes. But I do believe the Fed is moving towards that rate hike well before 2015 is out, and this should continue to support the US Dollar. I don't have any USD exposure and only hold my long AUDNZD position at the moment. But I am scanning the market for the next opportunity. Of course, I will let the trade come to me. However, at the same time, I like to take a peek and try to anticipate where there could be a setup in the pipeline. Right now, renewed EURCHF weakness is of interest, and I will be looking to buy this market should we see an extreme pullback intraday. Even with all the potential risk off in the markets right now, I believe there is enough incentive for the SNB to step in if things get carried away with EURCHF below 1.0500. So I will be on the lookout for a sharp intraday setback below 1.0400 to set up a compelling play. Otherwise, nothing much else is getting me excited, though one never knows where that next trade will come from.

Fed could still raise rates in Q3 2015. Via @joelkruger

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