The Federal Reserve of the United States decided on Wednesday not to hike the rates as words regarding the fragile state of the US economy appeared in the statement. As a consequence, the US dollar has been sold across the board but the move was quickly retraced as somehow the whole idea of rates being on hold was priced in.
Personally, he considers the EURJPY potential to the upside to be bigger than the one of the EURUSD but for this expiration date they should both be fine. The reason for higher EURJPY comes from the fact that it is moving in a leg of a bullish contracting triangle and it should move higher either with EURUSD or with USDJPY. Or with both. So it is looking like a win-win situation as Fed no hike keeps a floor under USDJPY while the EURUSD should act bullish.
Even though the Fed did not hike, we did had a hawkish language and despite the fact that oil and global markets developments are a puzzle for the Fed, future hikes are still on the table.
Oil Spiked Higher
Oil spiked higher on Thursday as rumors of a production cut hit the wires with Saudi Arabia agreeing for all OPEC member to cut up to 5%. While it is not yet confirmed, oil jumped aggressively on the news. That being said, it should be noted though that the falling wedge is not completed and the move to the upside should be interpreted as being only a 4th wave in the wedge. In plain English, any spike should be sold later.
NFP To Shape Next Week’s Trading
Non-Farm Payrolls are supposed to dominate next week’s trading as the job market in the United States is very solid and represents the strongest argument for the Fed to keep continue looking for hiking rates. While the language in the previous FOMC meeting was bullish, this is going to change if the NFP and unemployment rate is not going to confirm next week. In case the NFP is missing, then all bets are off when it comes to more hikes from the Fed.
The NFP week is very tricky to trade and one way will be to trade end of day expiration dates Monday and Tuesday and starting from Wednesday end of month expiration dates. The reason for that comes from the fact that volatility levels are really huge when it comes to NFP and the risk that the option will expire out of the money is pretty high.
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