Live to Fight Another Day


THE WILL OF THE MARKET - Very difficult to make sense of the post FOMC reaction in many ways and yet, this is what the market wants, a lesson so important to learn when trading. In the end, the Fed went ahead and raised rates while maintaining its outlook for three hikes this year. So one down and two to go. This will probably be 3 more hikes than any other central bank in 2017, which one would think would be US Dollar supportive on some level. But alas, the market has sold Dollars aggressively post Fed. At this point, it has become very clear that the bar for Dollar bulls is now exceptionally high. More hawkish is no longer enough to get the market comfortable buying Dollars. This means that if the Fed is as hawkish as the market thinks it will be, and even a little more than that, it simply won't be enough to rally the Buck. I say "even a little more than that" because there are many out there who still believe the Fed will still only deliver two total hikes this year. 

GOT IT WRONG - In Wednesday's technical update, I highlighted the possibility for the US Dollar to sell off, calling out an inverse head and shoulders formation on the Euro and some extended readings in the New Zealand and Canadian Dollars, which proved to be the correct assessment. But fundamentally, I was wrong in thinking this time round, a decision which confirmed the Fed would indeed be on course for 3 total hikes in 2017 might get more on board with the Fed's timeline and even rally the Dollar. Instead, it now looks like the Dollar could really fall off and stocks could once again push to fresh record highs. I believe the big money out there sees a future with a US government that will ultimately influence a lower Dollar and a Fed that will move as slowly as possible to assist in the Dollar decline. This has been a major reason why I haven't had any real US Dollar exposure of late, though I did take a shot post Fed on some incredibly stretched readings and on the possibility that we would see the market reverse sharply back in the Buck's favor into the close. 

Just because it didn't work out doesn't mean it was a bad trade. Via @joelkruger

A GOOD SHOT - The trade I took was AUDUSD, which I sold after the market exceeded severe readings intraday, setting up a compelling fade, with the possibility for a lower top on the daily chart below the recent high around 0.7740. I put a stop above that high and the risk on the position is small. The trade was very pretty and I have no regrets taking the shot. I'm more amazed at what we have seen in the aftermath of the decision than anything else. The only market that really did a good job adhering to my expectations was USDJPY, though not for the reasons that I had anticipated. I had been looking for a drop in the equity market to weigh on USDJPY and what ended up weighing on USDJPY was the intense US Dollar weakness. I had said I like the idea of buying back into EURAUD on a dip which could be around 1.3900, but with the AUDUSD trade setting up, this kept me away from taking EURAUD as I wasn't looking to have the double Aussie exposure. I don't believe I'm seeing the market well at the moment and this will keep me trading light and mostly on the sidelines until I do. This is another hugely critical lesson when trading. If you aren't seeing things well, get over to the sidelines until you do. Live to fight another day.  

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