Fed Up


  • Fed takes a more aggressive line
  • Trading around Sterling volatility
  • Risk off should invite Franc bids
  • Waiting to build into AUDNZD

MOVING AGAIN - Finally some volatility! We waited and waited and the markets are moving again. I have been able to take advantage a bit, trading in and out of the Pound against various currencies including the US Dollar, Canadian Dollar and Swiss Franc. At the time of this update, I have GBPCHF exposure and will be looking for a more pronounced pullback over the coming sessions after the market traded up into wildly overbought territory on the hourly chart. 

TWO REASONS - It's also worth noting the overbought readings on the GBPCHF daily chart, though at this point, the market has also triggered a major inverse head & shoulders base that could project a larger medium-term upside move. And yet, it would be difficult to reconcile such a move for two important reasons. 1) There is still more than a month to go until the UK referendum - so more turbulence expected. 2) The release of this latest Fed Minutes is not supportive of risk and in turn should invite demand for the safe haven Franc. 

FLIPPING IT AROUND - As far as the Minutes go, they were definitely a shocker. From my perspective, this was a welcome surprise. I have been arguing for higher rates for some time. While it is still unclear whether the Fed will move in June, the fact that the market saw this as a virtual impossibility and is now waking up to what I had believed to be a firmer reality is somewhat gratifying. I think the biggest takeaway from the Minutes is that the Fed no longer wants to feel like the market dictates what it should do.

THE IMPACT - On Wednesday, the Fed came out and asserted itself. It let the market know that only it will determine the timeline for policy normalization. This time, instead of the Fed adjusting to the market, it's the market that will have to adjust to the Fed. It may take the market time to figure this out. But from a price action perspective, this should open more US Dollar buying and selling in US and global equities. I will be looking to take advantage so stand by. 

Instead of the Fed adjusting to the market, it's the market that will have to adjust to the Fed. Via @joelkruger

CORE POSITION - On another note, I remain long AUDNZD from 1.0819 which seems to be miles away at the moment. But this is an exceptionally light position and I am playing it the same way I did when it generated significant profit the last two times we traded it. There is some major rising trend-line support towards the mid-1.0600s and should we get down there, I will use that as an opportunity to build more heavily into the trade. I really love this one and suspect we should once again see a big move higher over the coming days, weeks and months. 


Euro Battles around 1.1700

The Euro keeps dipping below 1.1700 but has refused to breakdown thus far. 

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