Federal_Reserve

Forex Price Action Report – A Hawkish Fed

Hello Price Action Traders,

So on Wednesday we were all waiting with bated breath for the last big scheduled news release of 2016, the FOMC rate decision.

Myself and Janet Yellen have had a trying relationship since she became Fed Chair almost 3 years ago. She has a track record of disappointing me. Promising much and delivering little.

But she and the Fed stepped up to the plate on Wednesday. Not only did we get the universally expected rate hike, it was followed up with a pretty hawkish dot-plot. And if that wasn’t enough, she didn’t even try to backtrack over everything during the press conference, as she often does.

I didn’t expect that, and neither did the market. The dollar took it as a green light to open up the afterburners and surge higher.

price action forex dollar index-min

This was an unexpected but pleasant surprise to me. I’ve been building shorts in NZDUSD for a good few weeks now.

It’s never easy, holding open positions during a news announcement like this. Even when you have stops at breakeven. You keep telling yourself – “look, stops are at breakeven, so I’ll either make a lot or I’ll lose nothing”. From a logical point of view, I’m convinced it’s the right thing to do. But that’s not to say it’s very tempting to take the floating profit and run before a news announcement.

I’ve had many floating profits slip through my fingers this year. So it was nice to close out 2016 with a news announcement that emphatically went my way. I don’t want to tempt fate, but I love the look of the NZDUSD chart right now. It continued to bleed lower on Friday, and we’ve now seen the first weekly close below 0.70 since June.

price action forex nzdusd-min

I’ve shown dogged determination with this pair over the last few months. It’s been one of the longest most frustrating reversals I’ve ever traded. But I’ve put in the hard work. I’ve taken loads of small losses. I’ve winced in exasperation as trade after trade got stopped out at breakeven.

But like I’ve always said, the market recognises the work that you put in. And as long as you can survive just that fraction longer than your competition, the market will reward you. I’m not home and dry on it yet, but if we manage to hold convincing below 0.6950, the start of 2017 is looking good.

I suppose the questions we’re all asking are these two: is this dollar strength going to last, and is the Fed actually going to raise rates 3 times in 2017?

I suspect the Fed won’t raise rates 3 times in 2017. But the fact is that they are at least talking about it. Most other Central Banks aren’t remotely close to even considering a hike. For as long as that continues, even if the Fed is very cautious, I think the Dollar will be supported.

Of course, one event could change everything, but that’s how it looks to me right now.

I’ll not be trading much next week, if at all. I updated the usual charts in the Pro Member Workshop on Friday, so if you want to you can check out the analysis here.

I’m going to finish off with one little interesting candlestick picked out by the MT4 Candlestick Scanner – a weekly and daily reversal combo on AUDJPY:

candlestick scanner-min

This signal is unlikely to do a whole lot more between now and the end of the year, but it might be potential one to keep an eye on over the coming weeks.

That’s it for now! This time next week I’ll be relaxing, so there’ll be no report!

Thank you for all your support during what’s been a tough year’s trading in 2016. Jon and I really appreciate all the comments, the encouragement and the camaraderie. I hope you all have a lovely relaxing break and let’s hope we can get 2017 off to a flying start.

All the best,

Nigel

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DISCLAIMER & COPYRIGHT

This update is based on my analysis on my charting package. It may differ to yours as it can be affected by time, market movements, charting packages and broker prices. I accept no liability for loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on any information in this report or analysis.