All traders are waiting for FOMC announcement this Wednesday to get any hint from Federal Reserve if there will be interest rate hike in December. Just few words for new comers – interest rate is the cost of borrowing money. Higher interest rates mean more expensive currency. As we are talking about USA, in case FED tone will be hawkish more buyers will come to dollar.
By the way, you can make your own prediction about interest rate hikes. How? – analyze main economic indicators, like housing, employment, PMI, consumer spendings. Sure, central banks, can always surprise the market with their decision. In case their tone will be dovish, traders will be looking to buy currency with higher interest rate, instead of dollar. This is how money flow works. I always use it to build trading strategy for managed accounts.
Many traders are getting confused why interest rates are rising and stock market keeps climbing as well. As people used to think high rates mean stocks decline. That is true, but only partially. You have to understand how much returns US business gives. If this number will stay in average at 10%, even 3-4% interest rates will be considered as low and stocks will be rising. Sure, we may see some short-term pullbacks, but main trend still will be up. All is relative in the market.
Now let’s have a look at technical picture of EUR/USD.
I fucus on short-term opportunities here. First of all, pay your attention to 1.17250 – 1.16950 range. IT was very strong resistance and now should be tested and act like support. So, I will be looking for rejections and go long till 1.18200 – 1.18500. And there I think will see nice short opportunity – 100 pips down or so. Don’t put pending orders, watch price action at these levels before taking trade. This is what I used to do and always keep my trading signals subscribers, when market meets entry conditions. My forecast for gold is still the same. And those, who want to get fast money in this market, should focus on scalping.
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