For me, knowing the roadmap daily is important. The roadmap tells you the targets. The roadmap tells you the risk. The roadmap keeps you in trend moves. The roadmap prevents you from riding a trend the wrong way.
Today, the FOMC rate decision has a bunch of unknowns?
- Will it be 25 basis points or 50 basis points?
- If they go 25 basis points, will it be a more “dovish” cut or not?
- If it goes 50 basis points, will it be a “hawkish” cut?
- Will it be in between?
What about the projections on rates for 2024 and 2025 and how does that fit with the markets perception? Does the Fed see unemployment continued moving higher, or do they see the move higher slowing once again? What above inflation? Will inflation continue to move lower in the eyes of the central bankers who set monetary policy?
I could go on, but safe to say, this meeting (and it being the first rate change lower in years) has a lot of uncertainty and nuances that can shift the tide more to a more dollar bearish to a more dollar bullish.
One way to map those changes is to have a read on the map and what keeps you – as a trader – driving this way (say lower USD) or switch and go the other way (say higher USD).
IN this video, I take a look at the three major currency pairs and show and explain the roadmap technically. I am not making it up. The “market” defines the levels and the market tends to react to the levels. Why? Because the best traders want to know the risks. Technical define risks.
So if you are to trade the FOMC rate decision – or even if you take the day off and come back tomorrow when the risk is lower – you want to know “what is what” and “why” technically.
Remember…the price action will help define the technical story that will be written about on the news sites tomorrow. If the dollar goes lower or the dollar goes higher, the fundamental story will match the price action move. What is different is the technical tools often give traders the risk, targets and bias levels that allow that movement to gather momentum, that allow traders to manage the trades.
So understand it.
This article was written by Greg Michalowski at www.forexlive.com.