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Janet did it! Print
Written by Site admin   
Thursday, 15 December 2016 14:34

Christmas has come early this year, at least for Forex traders. We had the Trump rally in stock markets and the US$ and then Janet followed through with her promise of the quarter point increase that everyone expected, and the Dollar has taken off again.

What was unexpected though was the even more upbeat tone of her statement from previous ones and responses to questions:

"With a 4.6 percent unemployment, and a solid labor market, there may be some additional slack in labor markets, but I would judge that the degree of slack has diminished. So I would say at this point that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment."

This optimism translates into expectations of a series of more quarter point increases in 2017 and that has kicked the dollar up and sent the Euro back into it's long term downtrend.

All this is great for Forex traders but the stock market is sidelined and not so ecstatic - so far.

The 4 hour chart shows this uncertainty of whether Janet's statement is bullish or bearish for stocks. On the one hand, the stock market loves a growing economy with low interest rates, and the stimulus of QE even more. But the Fed statement was notably light on any suggestion of 'fiscal stimulus' with this comment; "stock valuations are in normal ranges". Maybe we should keep a close eye on how stock markets perform over the last days of 2016.

 

From the blog

Buy the rumour, sell the fact

Has it all been over cooked? The Trump US$ rally seems to have kicked off on the basis that his policies will be inflationary and so interest rates will have to rise. Added to this, the Fed has been telling us all year there will be at least a modest rate increase. Next Wednesday 14th is the last opportunity the Fed and Janet Yellen have to do the deed, consequently the market is convinced it's a done deal and priced it in with the Trump rally.

But the TMEST swing chart is suggesting the dollar rally could be rolling over. So we had best trade what we see and not what we think, or have been told to think!

Markets have a habit of rising on rumours of good news and then promptly reversing when it's actually announced, as further expectations of good news slip away. Perhaps the market is coming to the idea that the US economy, talked up over the last year is just that, talk.

If Trump is to boost the economy it's not going to happen instantly. Any delays, and if the US economy actually turns out to be weak at the start of 2017, could result in what usually happens in the year following a two term presidency. Recession.

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