The price movement in the USD Majors said it all. The extremely cautious & dovish tone from the Federal Reserve (U.S Central bank) caused huge losses to the Greenback against its counterparts. While the FOMC was optimistic on the robust job creation & domestic economic growth, external factors like U.S-China trade talks, Brexit uncertainty and slowing global economy were hanging on the horizon as dark clouds. All of these have caused the Feds to suddenly adopt a wait-and-see approach as there are no more rate increases expected this year. This is not the first time Feds have taken this route – back in 2008 when the last financial crisis erupted the central banks dropped the interest rates from over 6% to less than 1% in no time. Following is the monetary policy curve for the major central banks – as you can see that FED has shifted position from being the most hawkish sentiment to a neutral bias within a couple of months.
A lot of times these rate decisions like this bring wild moves in the pairs & it is always prudent to stay on the side & not trade until the dust settles down. Today, however the initial sentiment reinforced itself as Majors gained against the reserve currency. The sudden shift in the sentiment from the FED. If you do still intend to trade these volatile economic events, USDJPY always provides the cleanest reaction and the correct bias. Let’s review hourly charts of the Majors to see how individual pairs reacted and their Short term (ST) & Medium term (MT) biases & sentiment.
GBPUSD – ST bullish, MT neutral
USDJPY – ST bearish, MT bearish
USDCAD – ST bearish, MT neutral
AUDUSD – ST bullish, MT bearish
NZDUSD – ST bullish, MT neutral
USDCHF – ST bearish, MT neutral
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