Gosh, I remember the days when the Bank of England hiked rates by 2% or even 3% and didn’t really make any impact on the market. Now the Fed announcement that interest rates are being held between 0.25% and 0.50% and the market reacts. Zzzz… Everyone’s getting too excited about very little. Give it another week and the market will have shrugged it off. It’s all a lot of baloney. Take the Japanese inflation rate. Officially it’s around 1.1%. More baloney. Prices have gone up and volume has gone down. That’s called “shrinkflation” and it’s happening big time here in Japan. The U.K. had shrinkflation back in the 1970’s and guess what? Shrinkflation collapsed because manufacturers could reduce volume any more and the inflation rate whizzed up to 15%. It is the sign of things to come.
Well, the Fed announcement has clearly caused a reaction that has seen new dollar corrective lows. I don’t think this is complete and most likely we’ll see another blip. I’m not sure whether it’ll happen today or tomorrow but basically the market needs a pullback to the sharp losses but should then see follow-through. This is most evident in the Continental Europeans and USD/JPY. The other direct pairs – GBP/USD and AUD/USD – are merely in a correction. While I hadn’t expected this development, it has given confirmation of what I feel is needed in USD/JPY in particular. Overall, this should mean that by next week it will be ‘business as usual.’
Thus, for today, don’t expect a significant day. The market will be a little shell shocked so just take a few pips when they are easy to take. By tomorrow – or if today is a complex correction – then Monday, we should begin to see a directional move once again…