Now I think all the juice about a potential Fed rate hike has been extracted. It’s about time to check all the nitty gritties about what is expected of the meeting. There are few aspects other than the actual 0.25% potential rate hike that are market moving. Investors should know beforehand the impact of the Fed’s infamous dot plot and the Fed’s stand when it comes to economic projections. Back in 2015 and 2016, many touted a March rate hike, but that didn’t come to pass and as a result, the Greenback tanked. Today, that might also happen if the there is no rate hike and if they retract from the anticipated 3 rate hikes this year-that gives it a 2017 closing range of 1.50%-1.75% and instead downgrade this view to a 1.00-1.25% rate by the end of the year. The later will boost the stock market but if today, the Fed raises rates by 0.50%, the bubble in the stock market will bust. Investors should also watch the live presser. Expectation for more clear views of US economic conditions, inflation projections and most importantly her monetary policy view going forward should move the market. Hawkish tone will definitely resonate well with investors and trigger a rally. On other news, UK parliament gave Theresa May a go ahead to trigger Article 50 by the end of the month. The GBP loosed ground briefly before bouncing back in NY session. Of course, more haranguing is expected as negotiation between Eurozone 27 members begins after that. Depending on the deal struck, especially on issues relating to free movement of EU citizens, the GBP can rally or tank. The later is more likely, it’s already 15% down against the Euro and there is no surprise that by mid this year, it shall be in parity. Positive Labor reports from the UK should boost the pound.
Today trading should be approached cautiously because of what’s at stake. Risk averse traders should keep off today and for the initiated ones, take a step back and review your entry position well before being whipsawed. I will personally trade the USDJPY. Technically, there are spinning stops in the daily chart with price action failing to close below 114. Entry will be in the 1HR chart with a buy stop placed above Tuesday’s high at 115.25. Since the stochastics is overbought and price is trending down, I can also wait for a buy signal to be formed before going long. If it comes to this, the most likely buy limit will fall in between 113.80-114.30 and that can be another region to buy if entry is manual. The stop loss will be 50 pips below with a 1:3-5 risk reward ratio. Break above that trendline in the daily chart can mean USD bulls are also in charge.
Trading can be from different perspective but these are my views on how it can pan out:
Buy Stop: 115.25
Stop Loss: 114.75
Take Profit: 118
Buy Limit: 113.80-114.30
Stop Loss: 50 point from execution point
Take Profit: 1:3-5 risk reward ratio
Watch out for all fundamentals.
Have a good trading day.