Forex Analysis (Tue September 21 2010, 2:15pm NY Time EDT) - US FOMC Interest Rate

[Sir Pipsalot]

FOMC keeps rates unchanged, keeps the statement "extended period", and announces that it's evaluating the potential of buying more assets - Market will be confused, but should be somewhat positive for the USD as anything short of a straight out large scale purchase, USD should remain strong.


this is what it took place today, but the market actually sold off usd

Yah, Henry and I disagreed with what would happen in this scenario. I believe he thought the market was really short USD and buying into the idea the FOMC would take some action, and that mere promises of potential action would be disappointing and lead to a USD short covering rally. My view was that only short term speculators were short USD hoping for action at this meeting, and that the big money was still on the sidelines waiting for confirmation. This type of market position would cause initial volatility and 2-way action, but ultimately USD weakness and a EUR/USD rally. Specifically, I said:

2) They do not announce or implement any new QE program, but strongly imply such a program is in the works to help support business confidence in the sustainability of the recovery. If this is the case, we could get volatile 2-way action initially, but as it digests, it should result in a EUR/USD rally good for 50 pips and a solid post-news trade.

There was indeed 2 way action initially (a dip as the news was released 30 seconds early), but a minute or two later the rally started up. It even exceeded my initial expectations. Henry does a great job previewing the news, but there are often different ways of approaching the same opportunity. My recommendation is to consult more than one source for the bigger news trades like the FOMC and its aftermath. I'm not always right either, but I usually admit it when I'm wrong... and I'm glad when people are being smart and consulting more than one source for things as focused as news trading.

Anyways, for more of my insight into Wednesday's trading and what the FOMC statement may mean long term, feel free to check my daily trading newsletter here:

https://www.forexpeacearmy.com/fore...rket-update-09-22-2010-long-term-insight.html

Sive here at the FPA also posts some good analysis as well, and while I don't keep up with his work as much as I used to, I hear good things from other traders.