From the Desk of Ian Culley @IanCulley
Fed Chair Jerome Powell spoke this afternoon after the central bank announced a 25-basis-point rate hike.
The fed funds futures were all over the place, from pricing in a 25-basis-point increase to a double-hike. They settled in around a single hike, with a slim chance of a pause.
Exhausting!
It’s clear we can expect increased volatility going forward.
But, instead of guessing the Fed’s next step or parsing Powell's words, I’ll rather sit back, wait, and prepare to trade a decisive breakout.
When I think about the latter stages of the hiking cycle or a potential pause, my mind immediately turns to one currency in particular…
The Japanese yen.
Since the Fed began raising rates last spring, the yen has been one of the strongest trending markets. It stands to reason it could experience a significant trend reversal as the Fed changes course.
Luckily, we have a clear level to set our alerts and define risk.
Check out the chart of yen futures:
It’s found resistance at a key polarity zone marked by the 2015 pivot low – challenging this critical level twice last year.
If and when Japanese yen futures post a decisive close above 0.007950, I like it long with a target at approximately 0.008775.
I had no idea whether the Fed would hand down a 25-basis-point hike or no hike at all today.
No one truly knows anything.
But the game doesn’t change because it’s “Fed Day.”
Identify your levels, have a plan, manage risk, and execute. Repeat. That’s it.
I know it sounds simple, but all traders and investors face those challenges throughout their careers – no matter what day it is.
Whatever Powell & Co. decided today will have broad market implications. I’m simply more interested in catching the next explosive move in the yen.
What about you?
What am I missing here?
Let us know what you think. We love hearing from you!
Thanks for reading.
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