This week we had a surprising FED meeting, with a rate hike bigger than expected. But thats not the surprising part…the surprising part is that the bankers and media, who leaked the information on monday, were actually right. Like it wasn’t enough the market has been acting crazy for the past few months, now we even have media and banks that aren’t lying? These are very weird and confusing times…I mean banks lying to us and giving false statements, was one of the things we could count on…and now this happens. But ok, now on a serious note. We might have seen a historic week…with the last push of the dollar bulls. On wednesday, Euro was super weak…it was hovering around 380 just 1-2 hours before the meeting, where FED was supposed to hike by 50 bps only. Euro was very near its long term support of 340…if that broke, hell would break loose. Now, if you are thinking just fundamentally, without knowing the market…you would think that a FED hike by 50 bps alone would be enough to take an already weak Euro down to 340, which was only 40 pips away shortly before the meeting and break it. And then FED came with a 75 bps hike! And YET, not only didn’t Euro break that level, it actually started going up. Which, for a trader who thinks both technically and fundamentally, made perfect sense. Long story short, all this hiking into 3-4% by FED is already priced in. Dollar bulls are already tired…they can’t go up until forever…you don’t make any profit until you close a winning trade…and once enough people close their trades, market turns around. And thats exactly what happened. And we might have seen what will come next, on thursday, when EU moved 220 pips up! Friday is mostly profit taking day and I didn’t expect bulls to make further progress, as the move on thursday was massive and they got tired by the end. But London fix on friday might have given us a clue that Dollar weakness is only starting. Those dollar bulls from the past few months will want to cash out eventually…and thats when Dollar might re-visit 101-102 on the USDx chart and possibly lower. Might be wrong, of course. 😉
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