Hi traders, how’s your weekend going? I had a very short trading week since as of Wednesday, I was out of the country for a business trip, so no trading from then on. I did, however, have one trade in the beginning of the week that I want to go over with you and we’ll get to that in a minute.
Last week was also filled with fundamental news releases, so, on the one hand, it was a good time to be away since I don’t trade news releases. On the other hand, I saw most of the previous week’s outlook unfolding really nicely (like CHFJPY, GBPCHF and NZDUSD) without being able to trade them. Then again, new opportunities will always present themselves, so I’m just looking forward to the new week!
On the US Fed rate hike
Last week finally had the much anticipated US Fed rate hike event, which went down a bit different than most people thought it would. A rate hike is basically a positive event for the USD, so many were expecting a rally after the hike. However, on Tuesday I mentioned this on Twitter:
The Fed rate hike is completely priced in. I wouldn’t be surprised to see an initial spike up and then a drive down. Who’s left to buy?
— Felix De Vliegher (@smartfxlearning) March 14, 2017
And then on Wednesday, this happened:
An initial short run up when the FOMC statement was released and then a huge sell-off at the time of the FOMC press conference.
It makes sense. Think about it. The market was pricing in a 100% rate hike already, so the hike was no surprise. Everyone who wanted to had already positioned themselves. Additionally, there was one dissenter (Minneapolis President Neel Kashkari), so the decision to hike rates wasn’t unanimous.
And greedy as the market is, we were already looking for signs of even more improvement and potentially 4 rate hikes for 2017. Unfortunately, this didn’t happen. Fed chair Janet Yellen mainly kept the same tone as in previous statements and the Fed’s economic projections stayed pretty much the same as what they released in December. Hence the sell-off.