As a follow-up to my last post, you don’t need to guess right on what the Fed, ECB and BOE will do in order to make money this week. Same goes for the data.
At this point, you want to know as much as possible about what’s expected. When the headlines hit, be quick and go with the market. After you make the trade, continue to evaluate the news. Is this a subtle change or is it a game-changer?
The keys are preparation and execution but they go hand in hand.
It’s tough to get in on knee-jerk moves but (more than anything) central bank decisions create multi-hour or multi-day trends. Look at last week’s RBNZ decision for example. They surprised the market by adding a clear hawkish bias, saying ‘The removal of monetary stimulus will likely be needed in the future.’ The kneejerk higher was 50 pips but the pair retraced 20 pips in the hours after the decision and then climbed 1.5 cents in a straight line.
