Highly anticipated, and probably the most widely discussed financial news of 2015, the Federal Reserve increased the interest rate by 25 bps for the 1st time since 2006. This increase was anticipated by most of the economists, investors and traders the world over. Even though the rate hike was anticipated, the markets following the news release were very volatile.
As a trader, I pay attention to the “now moment” and the question I continually ask myself is ‘how can I profit from the market after the news’? EURUSD is my main focus in the forex market.
Fundamentally, the European Central Bank is still “printing money” although the scale is not as big as investors’ expectations. On the other hand, the Federal Reserve is utilising interest rates to influence inflation in the US economy. The policy difference between the two central banks will remain as is for the foreseeable future. Technically, the EURUSD monthly chart is still in a strong downtrend. The upsurge from the ECB’s November interest rate decision was just a simple pullback on the EURUSD weekly chart and now price is back in the weekly moving average sell zone.
This week’s price action has found resistance at the 1.1000 level – a long term support/resistance level on the monthly chart.
Here is my trading plan for the EURUSD. Plan A: There is still one more trading day to go before this week’s candle finishes printing. If the candle closes small and bearish like it is right now, then a potential weekly trend flow setup may emerge. Plan B: I will look for a trade setup from the 4 hour chart up to the daily chart. The trend has changed to a downtrend on the 4 hour chart. What I am waiting for is a convincing break down of the 1.0900 level first. If price pulls back to retest this level after the break and confirms it as resistance, then I will combine other technical factors to look for a short trade opportunity.
Hopefully today’s blog can give you some insight of how I integrate fundamental analysis with technical analysis to form a view of potential long term direction of a product. If you would like to learn more about the trading strategy I discussed today, feel free to register for the CMC Markets’ Premium Education Program.
Hao Sun (Trade With Precision)