EURUSD trading setup
Wednesday, January 25, 2012
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Bernanke’s Openness To QE3 And Fed’s 2014 Low Rate Pledge Kills The Dollar .
The Federal Reserve’s decision to extend their low rates pledge to 2014 drove the dollar sharply lower against the euro, British pound, Japanese Yen and other currencies. The greenback’s earlier gains were completely erased with the EUR/USD rising to its highest level year to date. Everyone expected the Fed to be dovish but few anticipated enough consensus within the central bank for them to push out their extended rates pledge by one year. According to the FOMC statement, the central bank is effectively saying no to any rate hikes for the next 2 to 3 years and more importantly, is leaving the door wide open for QE3. Unfortunately the individual projections for the first rate hike created more confusion than clarity, causing choppy trading in the U.S. dollar. While the statement exuded a sense of solidarity, the individual projections show significant division in the central bank. Of the 17 participants in the FOMC, 3 expect the Fed to raise rates in 2012, 3 in 2013, 5 in 2014, 4 in 2015 and 2 in 2016. In other words, as shown in the following graph from the Fed, 6 FOMC participants see interest rates increased before 2014 and 6 see rates increased in 2014 or later. As confusing as this may be, interest rate hikes are not on anyone’s radar. Instead the key question was whether the Fed would fire up the printing presses this year and according to Bernanke additional bond purchases remains an option. In fact, he spoke about the central bank’s readiness to expand their balance sheet so many times during his press conference that he could be hinting of plans to pull the trigger on QE3 in March.
Although the FOMC statement shows the influence of the new voters, the committee as a whole (voters and non-voters) shares vastly differing views on the outlook for the economy and monetary policy. What the Fed should have done was simply release the projections of this year’s FOMC voters and adjust as necessary every year. Nonetheless with 3 hawks and 1 dove replaced by 3 doves and 1 hawk, the U.S. is clearly left with a central bank that is more willing to consider the idea of increasing asset purchases. In addition to releasing their projections for interest rates, the Fed also has a quasi-inflation target of 2 percent.
The chart below shows my trading setup on the EURUSD ,.Good Luck my friends
The Federal Reserve’s decision to extend their low rates pledge to 2014 drove the dollar sharply lower against the euro, British pound, Japanese Yen and other currencies. The greenback’s earlier gains were completely erased with the EUR/USD rising to its highest level year to date. Everyone expected the Fed to be dovish but few anticipated enough consensus within the central bank for them to push out their extended rates pledge by one year. According to the FOMC statement, the central bank is effectively saying no to any rate hikes for the next 2 to 3 years and more importantly, is leaving the door wide open for QE3. Unfortunately the individual projections for the first rate hike created more confusion than clarity, causing choppy trading in the U.S. dollar. While the statement exuded a sense of solidarity, the individual projections show significant division in the central bank. Of the 17 participants in the FOMC, 3 expect the Fed to raise rates in 2012, 3 in 2013, 5 in 2014, 4 in 2015 and 2 in 2016. In other words, as shown in the following graph from the Fed, 6 FOMC participants see interest rates increased before 2014 and 6 see rates increased in 2014 or later. As confusing as this may be, interest rate hikes are not on anyone’s radar. Instead the key question was whether the Fed would fire up the printing presses this year and according to Bernanke additional bond purchases remains an option. In fact, he spoke about the central bank’s readiness to expand their balance sheet so many times during his press conference that he could be hinting of plans to pull the trigger on QE3 in March.
Although the FOMC statement shows the influence of the new voters, the committee as a whole (voters and non-voters) shares vastly differing views on the outlook for the economy and monetary policy. What the Fed should have done was simply release the projections of this year’s FOMC voters and adjust as necessary every year. Nonetheless with 3 hawks and 1 dove replaced by 3 doves and 1 hawk, the U.S. is clearly left with a central bank that is more willing to consider the idea of increasing asset purchases. In addition to releasing their projections for interest rates, the Fed also has a quasi-inflation target of 2 percent.
The chart below shows my trading setup on the EURUSD ,.Good Luck my friends
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