Predicting Price Movement In An Unpredictable Market

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Seems like we recently had yet another wild ride in the global markets. Firstly, we had Apple earnings on July 30, but hey this is a FX article, so what is more important than that? I’ll tell you what is more important: FOMC Day. The great economic experiment continues with an apparently robust economy, yet once gain the Fed is choosing to keep interest rates historically low. On July 31st, the Fed Chairman Jerome Powell lowered rates in the US to 2.25% with a quarter basis-point cut, describing their actions as a ‘mid-cycle adjustment’, with further statements indicating that the Fed was not convinced that a full round of easing was necessary in the near future. Are you feeling somewhat confused by these statements and actions? Well join the club!

In my years as a trader and investor, one of the biggest challenges I’ve faced was how to make sense of the fundamental news and economic data and then how to use that to make quality buying and selling decisions in the currency market itself. The two just never seemed to work in sync, so my decisions were down to opinion and a prayer rather than a simple rules-based approach to taking my entries. I have forgotten just how many times I have seen good news cause a selloff, or bad news precede a massive rally. More often when reading the news, we find ourselves on the wrong side of the market action. I've since learned better.

Making sense of the actions of the Fed and reading between the lines of Jerome Powell’s comments is just as much of a headache today as it was when Ben Bernanke was running the place. However, translating price action and the movements of the major institutions has always been a far simpler approach to take. That’s why I embraced the concepts of letting price tell the true story, instead of the news. As my fellow instructors and I have stated on multiple occasions, the laws of Supply and Demand always dictate where price is more likely to go when probability and risk management is fully respected. You just have to follow the clues. 

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