Hey guys,
To end last week, we saw the US Federal Reserve hole their official benchmark lending rate by 0.25%. This move was widely expected by economists and now sees rates in a range between 1.75% and 2.00%.
While the hike was expected, what surprised traders was that the Fed then projected they would increase rates twice over just the next few months. This of course being much faster than the market expected and was why we saw such a rip in the US Dollar across forex markets.
Take a look at the US Dollar Index daily chart below:
DXY Daily
You can see the the DXY rip sent price straight into the current higher time frame resistance zone and will give traders a nice starting point to look for intraday positions this week.
Just check the hourly chart for how price had such an instant reprice on that timeframe shock from the Fed:
DXY Hourly
But look how we immediately lost intraday momentum now price is in that zone.
With markets also pricing in three rate hikes next year, a pace unchanged from their previous projection in March, it’s going to be interesting to see how price action unfolds around this support/resistance zone.
Now turning our attention to specific forex markets, we know that in comparison the Fed hikes, the Reserve Bank of Australia has kept our official cash rate at 1.5% for the last 20 months. A record low rate that seems to Ben lingering around forever.
Take a look at the bearish technical damage this disparity between the country’s monetary policies has done to the higher time frame AUD/USD chart:
AUD/USD Weekly
With the higher time frame resistance zone holding and now trend line support being broken and retested as resistance, things are looking like they could get ugly quick.
There doesn’t seem to be any sort of a pullback on the intraday chart just yet:
AUD/USD Hourly
All this shows is how much momentum is behind this move and just how fully in control the bears are of this market.
But as always, opportunity will present itself around these higher time frame levels. We just have to be patient enough to take advantage of the right setups.
✌🏻.
| Steemit Blog
Market Analyst and Forex Broker.
Twitter: @forexbrokr
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