We are now just hours from the main event – a Fed rate decision that could see the first rate hike in nearly a decade.
Everyone has their opinions about what the Fed will do and whether or not the markets will be able to absorb the news in an orderly fashion. But as you may well know, the only thing that matters is how the market actually responds; everything else is just noise.
With this in mind, I will maintain my usual “wait and see” approach with an extra dose of patience.
That said, one pair that I am keeping an eye on as we head into today’s FOMC statement and press conference is GBPUSD. The pair has been trending lower since mid June and has recently carved out a bear flag pattern on an intraday basis.
Keep in mind that a pair like GBPUSD will be highly susceptible to volatility in the wake of the Fed’s decision. For that reason alone, I won’t entertain an entry before the FOMC press conference, which is scheduled for 2:30pm EST.
In fact, unless we get an extremely convincing bearish signal on a retest of former support as new resistance, I won’t be interested in taking a position here at all. I certainly don’t want to try to force anything out of this pattern given the high levels of volatility and liquidity concerns that will stem from the second half of today’s session.
Also keep in mind that the markets are likely to remain unsettled for quite some time following today’s events. So regardless of what you decide to do here, just be sure that it meshes with your trading plan as well as your overall tolerance for risk.
From here traders can watch for the 1.5050 area to act as new resistance if retested as such. To the downside, key support comes in at 1.4900 and 1.4800.