Yesterday’s post was published just before FED’s announcement. In a nutshell, FED did what was in  general terms expected, only on steroids. Intention is to spend $1.2 trillion dollars in effort to boost economy, primarily housing market. The Fed plans to buy up to $300 billion long-term government bonds and some $750 billion in mortgage-backed securities, which would help revive the country’s sagging housing market. I believe that Fed hasn’t set out to influence long-term interest rates by buying long-term bonds since the 1960s. I have some personal thoughts here, and it is not meant as criticism, but observation. Pushing long terms lower at all costs will probably bring mortgages down, although they are at historically low levels already. Problem is that unless banks don’t loosen standards for a loan, like amount of down payment, few people will qualify and buy houses. It is possible that home owners will want to refinance, bringing a lot of fees, and business, to banks. Here again, though, it will depend on amount of equity and employment status of borrower. If lending institutions relax their standards too much and give loans to everybody who walks through the door, we’ll be right back where this mess started.
There is much more to it, but right now I want to focus on trading. Currencies responded in a ferocious manner, especially dollar pairs. I had all the charts up to see what happens, and was surprised as hell. USD started to fall as soon as the announcement was being read. By the time statement was finished, about 70 seconds later, EUR-USD was up 240 pips. One of the biggest moves I’ve seen in a long time. In most instances trend would reverse right then, but not this time. Price paused briefly and just continued on for another 200 pips, in a more orderly fashion. This was one of those occasions when I wished I had an access to an order book of a really big liquidity provider. The way price moved , it didn’t look that it was all reaction, but rather very large dollar sell orders were being tripped every 10 pips or so. Guess I’ll never know for sure.  All people who have been asking me why I don’t trade news, that was why. Find yourself on a wrong side of market reaction like this one and it doesn’t feel good at all. Few hundred pips in matter of minutes, stops are not honoured and you can’t get out…. My take on the move is that dollar has been discounted on fears of mounting debt. Today this process continued.
I did place one order before, a buy in GBP-CHF. It was entered about 2 hour prior to release. Even this cross whipped heavily, something I didn’t really expect. I mean 50 or pips maybe, but it was closed to 180. For once a good thing happened to me- order was filled with slippage in my favor. Rare, rare event.

Entry happened to be at 1.6212, instead of 1.6250 so a small gain. Original plan was to hold for 250+ pips. Unfortunately, price has not really turned the corner today and the action is erratic. Took some pips off the table, about 130 of them. One more buy order was placed at 1.6388, with objective 1.6550. Price just made a run at this level, but missed it by 2-3 pips. Order stands.
I suspect we will see a lot of indecision tomorrow, my trading will likely be on a slow side. Simply don’t see the kind of set ups I like.

Small order was placed in AUD-JPY. Trying a buy at 65.65 and looking for 100 pips.  I hope that whoever reads it made some pips, or at least avoided losses,  yesterday. On the same token, what will FED buy next? And with what? More borrowed money?

Mike K.