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EUR/USD Post-FOMC: The Signal & The Strategy – Nomura

The Fed was hawkish and the effect is  felt many hours after the big announcement.

For EUR/USD it meant a big breakdown. Can it continue lower? The team at Nomura lays out the strategy:

Here is their view, courtesy of eFXnews:

Nomura is out with a note discussing some  thoughts on the signal from the October FOMC and how this will feed into its FX trading strategy going forward.

The signal: Pretty hawkish, and pointing to US monetary policy normalization being on track.

First, QE ended. Second, there were no explicit comments on weak foreign growth, a strong dollar, or tension in financial markets. Third, the Fed toned down its language on labor market slack, now saying it is ‘gradually diminishing’. Fourth, it took out the sentence saying that ‘a highly accommodative stance of monetary policy remains appropriate’,” Nomura clarifies.

The strategy: Looking to sell EUR/USD but  reluctant to call for a significant and broad-based repeat USD gains.

“Earlier this week, we added fresh EURUSD downside (1 by 1.5 put spread 1.26/1.2375). We missed the opportunity to sell EURUSD spot right ahead of FOMC around 1.2750. But, if anything, the signal from the Fed makes us more inclined to try to get such additional EURUSD downside on board in the coming day,” Nomura advises.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.