Seeking Alpha

Seamus McKenna's  Instablog

Seamus McKenna
Send Message
Seamus McKenna is founder and Chief Executive of Omicron Forex, a dedicated in-depth resource for Foreign Exchange traders everywhere. He has a technical background and many years of experience in trading using quantitative, fundamental and technical analysis. Private retail traders, especially... More
My company:
Omicron Forex
My blog:
Omicron Forex
My book:
The Omicron Forex Trading Manual
  • Why Do Fed Minutes Often Contradict Its Actions? 0 comments
    Jul 11, 2013 3:27 AM

    It is not normally the job of a central bank to manipulate the value of its country's currency. But it is its job to moderate the decline (or appreciation) of a currency if fundamental factors change that might give rise to such movement.

    This is the best way to interpret the minutes of the last Federal Reserve meeting which were released yesterday and the remarks made by Fed chairman Bernanke during the question and answer session after a speech he gave to the National Bureau of Economic Research Conference, also yesterday.

    The US dollar is going up in the medium to long term because QA is coming to an end, and the main concern of the Fed now is to make sure that this is an orderly process. Thus the Fed minutes and Mr. Bernanke's comments have led to a temporary fall in the US dollar, to somewhat offset its rise of recent weeks.

    The same goes for the Aussie dollar. It has fallen precipitately since last month and the efforts of the Australian monetary authorities now have to be to make sure that, while a weaker AUD is in fact desirable, this does not happen all at once.

    There has been a rapid decline in the value of the Aussie against the U.S. unit. This has now halted, at least temporarily, and there should be a retrace. The extent of this will be affected by the significant resistance level that exists around 0.9380, as can be seen in the monthly chart below.

    (click to enlarge)

    Below is the daily chart of this pair, which gives an even better impression of where this resistance is in relation to the current price.

    (click to enlarge)

    The efforts of central banks to moderate movement in currency rates, while it does indeed result in somewhat orderly changes when seen, for example, on the weekly and monthly charts, can give rise to significant bi-directional volatility on shorter scale time frames (we find it necessary to distinguish between bi-directional and uni-directional volatility for trading purposes).

    Individual traders should consider staying out of the Forex market for the retrace discussed here as it will be very much a countertrend move.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Forex
Back To Seamus McKenna's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • Fed minutes and Bernanke comments bring the U.S. dollar rise to a stop: http://goo.gl/IXtWh
    Jul 11, 2013
  • Why Was A Reliable Predictor Of Currency Rate Movement Ignored This Month? http://goo.gl/NlQMz
    Jul 10, 2013
  • $GLD Gold has less baggage than other vehicles when it comes to trading a strong USD: http://buff.ly/11K3w3K
    Jun 27, 2013
More »
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.