The USD Index has rejected the major highs after the Federal Reserve hiked rates by 50bps. Could this offer short opportunities for the USD?
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USD Index Analysis
The latest FOMC meeting saw the Federal Reserve hike interest rates by 50bps to 1.00% This was outlined by the Federal Reserve Chairman Jerome Powell a couple of weeks prior to this announcement which has seen the USD Index reverse from its highs. In the press conference the Federal Reserve Chairman was concerned about the rising inflation and stated that we will see two more 50bps hikes.
When trading these events we often see retail traders misled by thinking that a rate hike is good for the market and they often get caught on the wrong side of the move. When a central bank talks about a rate hike to come we see that currency gains strength until the announcement and then the market tends to move in the opposite direction. This is because large funds and investors have already priced in the information and have made their moves before the event. This is partly why we have seen the USD weaken.
The USD Index chart shows the price rejecting the 2017 highs and breaking through a key consolidative pattern. If the price is going to continue to move lower we could see the price move back to the previous support of $100. In order to look for a short opportunity we could look for the price to retest the consolidation support as resistance and if the price forms bearish price action a short idea could form.
Do you trade GBPUSD? in our recent video we discuss if the current trend is at an end. You can watch that video here.
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