Forex Blog

Taper Or Not To Taper? FED Make Up Your Mind

Dollar Index

Recent fundamentals have been playing heavily on the markets. US Fed stance has moved from “Taper or Not to Taper?” to “When to Taper?”, at least that’s what I gathered from yesterdays’s FOMC announcement.

If the above statement went over your head and you are lost then here is a quick low down.

Quantitative Easing (QE) is a fancy word for printing money from thin air. When Fed prints more money (more supply) the value of each US Dollar goes down. When they stop printing the price goes up i.e. Dollar Index goes up (EURUSD, GBPUSD etc fall).

Right now Fed is printing at a rate of 85 billion dollars per month, which they are looking to cut down/stop if the economic numbers improve such unemployment rate, new job creation, CPI etc.

So far things are looking on the up for the US economy, at least that’s what the number says. All eyes are now on next NFP data followed by next FOMC meeting in the middle of next month.

Technically, this indecision is hurting how we trade. The market is undecided and is range bound. US Summer months are usually slower and fundamentals not doing us any favor.

However I am hopeful about the future. Once tapering starts we should see US dollar starts to gain strength and nice sell-off in pairs such as EURUSD, GBPUSD, AUDUSD etc.

From where we stand today Dollar Index is testing Channel high, bouncing up from double bottom. I would like to see a breakout above but price could also move sideways before eventually moving higher.

Over to you now…what do you all think?

  • Mikos

    I think FED will hold off tapering, creating wild swings…watch out!

    • admin

      This could also happen, they may not start tapering in September. Next FOMC meeting will hopefully lay down a clear road for us.

  • Jason

    How much weight do you put on fundamentals in calling trades?

    • FirePips

      I don’t use fundamentals to call trades but keep an eye on all important news releases. Fundamentals impact the long term price movement.

      • FirePips

        Here is on my tweet from earlier “Fundamentals dictate long term price movement, Technicals decides how the price will get there”

  • Viren

    Taper aside there is also a issue of debt ceiling approaching in Oct-Nov. USD bulls will have hard time pushing the price up.

    • FirePips

      Agree, as long as it creates volatility I am happy. Calm non-trending markets are hard to trade.

  • Ahmed

    Any update on the AUDUSD trade?

    • FirePips

      So far it is moving on track, a little over +70 pips in profit. We’ll keep it on for a bit longer.

      • FirePips

        Price started to form a double bottom and I closed it when it tried to break below a second time. Total profit +77 Pips.

  • Michael H

    Before fed even starts to taper US may attack Syria, now that changes the whole scenario…ain’t it?

    • FirePips

      Syria impending war situation and its impact on currency market require a whole new post on its own. May be I’ll write one by next week; USA hold off those Jets!

      • FirePips

        In nutshell, if strike on #Syria does happen then expect #USD & #CHF to strengthen and #AUD to weaken

  • user

    Hello Firepips,
    May we have some news? we had no trade this week, only one the week before.
    Your last poste is dated from 22 August
    Are you dead? Should we expect anyhting?

    I’m sorry to shake you, but I personnally (don’t know for others) suprised by the lack of communication.
    Maybe we are not looking at the right place?

    • Alex D.

      Yes, it looks like they are dead.
      No more signal, no more news!

      • FirePips

        Resurrected :)

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