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Hawkish FED increases risk sentiment

Article by ForexTime

The US federal reserve has stolen the spotlight today as the FED looked to lift rates once again; something which markets had expected. The lift of 25 basis points was a showcase of strength that the US economy is booming and that steady inflation may indeed be back on the menu, it’s clear though from the FED comments that they have no intention of taking their foot of the pedal at this stage. As a result the USD has strengthened sharply in trading today, but there is also a lot of talk around how the FED is looking at inflation. It firmly believes that there have been a number of one of events which have helped boost inflation, and this may cause some concern for further lifts in inflation in the long run. So if the economy does not grow we could see inflation struggle to increase if at all. The big winners today though were the USD traders, and the big losers were gold traders as a result of the news.

For the USD traders it was a strong session as risk adversity was off the menu all together. EURUSD bulls had for some time been in control of the bullish movement upwards, but it will be interesting to see how the market reacts to the strong rejection of resistance at 1.1298. Expectations had been that it would look to rise higher and even push up to 1.1366 before taking a break, but with the recent developments today we could see the USD bulls come roaring back and look to take a swipe out of the EURUSD and push it back down to 1.1162. In the event there was a bearish breakout lower testing support levels I would pay attention to the bullish trend line that is still very much in play. Traders will certainly look to respect it and even treat it like a line in the sand against the bears if required.

Gold also always has a good place on the world stage when it comes to dealing with risk and hedging for scenarios you can’t always predict. However, the recent double top at 1292 continues to cause headaches for gold traders and this was further exacerbated by the FED rate decision today, which saw gold take a huge nose dive as a result. There were previous concerns about the bearish trend line and perhaps gold bulls may defend here, but the FED result has put that all in doubt and I would expect it to be treated as dynamic resistance in this instance. While it has paused at support at 1256, anticipation is building we could see further weaker waves down to 1227 and 1200, which is always a strong psychological level.

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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