Yesterday, traders were waiting for the F.O.M.C. announcement at 19:00 GMT – with particular attention being paid to any additional information surrounding Interest Rate policy. The Fed removed the word “patient” from its statement as expected. But – it also downgraded its views on the economy and inflation and lowered its interest rate trajectory.
“The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
There is a stark contrast between intention and action and it is important for investors and traders alike not to forget this salient difference. The ECB has put into action a colossal money program, printing and injecting €1.14 Trillion into the Eurozone economy from now until at least September 2016. Meanwhile, the Fed are intending to raise interest rates at some point this year, but still with no real clarity on the subject.
The market needs exact timelines and action to trend a certain way, not intentions of ‘should be’ and ‘could be’. This contrast has been reflected in the markets. The Euro has retraced almost all of it’s gains from yesterday after the F.O.M.C. announcement, falling from the high’s of 1.10 to the 1.06 area in trading today. The DAX was little unchanged in trading yesterday after this announcement. It didn’t even fully retest the lows set earlier in the day at 11813, let alone break through this level. It’s safe to say the bulls are still holding onto this market for the time being.
(click to enlarge)
CONCLUSION – BULLISH
For bulls, I would need to see the 11850, Hourly 200 moving average (green line in the chart above) and 11750 levels to be taken out for my viewpoint to turn bearish. These are also areas that bulls can lean against today.
For the more risk averse trader, it would be wise to see the Hourly 100 MA reclaimed with at least a few bars formed, before stepping into the market.
For bears, price needs to close and hold below the 200 MA.
Bearish targets :-
- 11813 (yesterday’s lows)
- 11750 (resistance zone – see chart above)
- 11690 (Daily S2 Pivot)
Bullish targets :-
- 12002 (today’s high)
- 12123 (Daily R2 Pivot)
- 12222 (all time high + near Daily R3 Pivot of 11215)