You can't use past history as central banks have rewritten the book.
Read my last newsletter for what to watch out for.
sofia kaprikorn 14:57:06 GMT - 07/27/2014
GVI Forex john
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If I may ask when it becomes obvious for the market that the Fed is behind the curve and needs to tighten?
Asking you to share your view based on the experience you have from the previous tightening cycles. TIA.
GVI Forex john 14:32:08 GMT - 07/27/2014
JP- You can never know if the markets have it "right". That is why we focus on "High Impact" data releases. They are high impact releases because they can CHANGE the outlook for monetary policy. By correctly anticipating how the OUTLOOK for policy is going to be impacted by a data event, you can get a jump on the markets. this is what trading on the "fundamentals" is all about. Personally, I think you cannot trade on the fundamentals alone. The technicals are indispensable for proper trade execution once you figure out how you want to position yourself.
Mtl JP 14:07:40 GMT - 07/27/2014
john how do we know when the players have it all fully priced in, or more importantly not, and therefor spot a potential trade opportunity as a "catch up" trade ?
GVI Forex john 11:13:37 GMT - 07/27/2014
Fundamentals for Trading. EXCLUSIVE CHART:
Here is a further explanation of the chart below for the current state of the U.S, money markets ahead of the FOMC decision on Wednesday. I have not included a currency pair.
The cost of money is interest rates. higher interest rates increase demand for a given currency and lower interest rates mean reduced demand.
There are two interest rate lines. The RED dashed line is the official Fed administered cost of overnight funds (Fed Funds). It does not change frequently. The other RED line is the free market cost of funds for two years. The market two year rate amounts to a forecast for the official administered rate for the next two years.
When it is below the official rate, depositors and lenders are saying that they expect the official rate is going to fall. If the market rate is above the official rate, it means they agree that oficial rates are going to rise.
This chart says that professional traders agree that the FED is going to increase rates sometime in the near future. Rising interest rates should be EURUSD positive.
So you can see that rational traders have ALREADY tightened monetary policy FOR the Fed. The cost of money in the two year time frame is already higher. A Fed rate hike now would only confirm what the markets already have discounted. This is how the wholesale markets for money have always operated. They MUST operate this way if the institutions are going to survive.
Actionable trading levels delivered LIVE to YOUR charts
Mon 27 May 2019 AAGB/US- Holiday Tue 28 May 2019 A 14:00 US- Consumer Confidence C 13:00 US- Case-Shiller Wed 29 May 2019 A 08:55 DE- Employment AA 18:00 US- BOC Decision A 18:30 US- EIA Crude Thu 30 Mar 2019 AAEZ/CH- Holiday A 12:30 US- Weekly Jobless Fri 31 Mar 2019 AA 10:00 EZ- Flash HICP A 12:30 US- Personal Income, Spending, Deflator AA 14:00 US- Final Univ of Michigan
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