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.
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.
Look at the US Dollar Index overlaid with the short ETF for the S&P500.
In other words, when the blue line goes up, that means stock market shorts are making money (along with rising dollars). But when the blue line falls, that means the shorts are losing and people who own stocks are the ones making money (with dollars falling):
Markets continue to churn sideways, frustrating most investors.
Instead of allowing the market to dictate your emotions along with the herd, let it simply highlight the path of least resistance. That’s what I’m doing.
Today, I want to share with you two ways to trade the British pound – regardless of its next directional move…
The structural trend for the pound undoubtedly points sideways. A zoomed-out weekly chart makes that clear:
Yes, it has reclaimed a critical shelf of former lows. But it’s messy. And while I believe the pound and other currency pairs will begin to trend in the coming weeks and months, I have no idea what direction they will take.
So I’m prepared to trade the British pound in either direction.
Earlier this week we held our February Monthly Conference Call, which Premium Members can access and rewatch here.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each