FED rates announcement didn’t bring any surprises. No news worthy action took place. Interest rates remain the same and the outlook is for them to stay low. Somehow currencies reacted strongly to it, with a lot pairs spiking 100+ pips. That included Yen crosses, which had very eventful day even before the data release. I didn’t even bother watching it live, for the first time in months. With nothing at stake, decided to go for a walk. Had to clear my head after a busy day full of big moves and good trading. There was a lot questions about those wild trades, so here is some additional analysis of how it all unfolded.

I’m using CAD-JPY as an example and another charting software. Once price started to fall from the high B, recent low A became reasonable target. One would expect some kind reaction at that level. This happens more often than not,  a bounce or at least a slow down. It is not just the support level, price fell about 250 pips, which is a good size move for CAD-JPY. Even more reasons for a slow down. Well, it didn’t happen and price just kept moving, eventually getting under 86.00. That was also a potential target derived using FIB projection tool on the previous swing A-B. The 1.62 projection level is relatively infrequently  reached in a straight run, like here. This increased chances for reversal, especially while happening during first hour of London session, when things often turn around. That’s when I bought this pair.

Once price started to head up, move from B to C became most recent swing, used for farther price projections. FIB retracement tool suggested could have been used for target, once a minor resistance at around 87.30 was broken. The most commonly used level, 62% also coincided with a 100SMA, which made this area even better candidate for an objective. However, it was very fast, almost 300 total pip. Big moves, maybe a little too big for intraday swings.

This is how it looks on one magnitude larger chart, 4H. The low at C tested a support from some time ago at E. On one side, this graph looks like a major top is being built, with more room down. On the other hand, this reversal at C is strong bullish formation. Since more recent market events take precedence, one could lean towards bullish sentiment to unfold.  Unfortunately, this chart is a lousy candidate for a buy, because of distant stop, if necessary- under 85.90. Selling here is also expensive. Unless one is willing to risk a lot of pips, smaller time frame chart might be better to use.

I’m moving to current time and chart of GBP-JPY. Action in this cross was very similar to CAD-JPY yesterday.  Due to my long term bullish bias for that pair, I’ll try to buy it on a breakout of current set up. Price spiked above 160.30, passing high from yesterday, and seems to be falling. Yet another fast move, but I don’t think it will turn into anything like what we saw last couple of days.

I have a buy order at 160.45, looking for 210 pips. Should the price keep falling, the area of last low could be attractive buy, but can’t be sure at the moment. Have to wait and see what happens. However, the breakout buy order stays. Today being Thursday, I think that price will stay within this large range of 156-163, for the rest of the week. Bears could try to sell hourly chart at current price or on breakout under 158, with an objective 156.  I’m sticking to buy orders for now, at least today.

Mike K.