Follow Through Is Key For Reversal

The highly anticipated FOMC decision didn't disappoint form a volatility perspective, as the firmer guidance from the Fed on when we might see tapering pointed to this year, meaning either a September or December start. This in turn sent the U.S. Dollar soaring as we suggested it might.
Before we pat ourselves on the back, we were rather concerned by some of the other comments; yes, the unemployment forecasts were good, but there was a rather nasty aftertaste in cuts to growth and inflation forecasts. The Fed won't actually raise rates or really do much (surely cutting back on QE isn't really doing anything, more stopping doing stuff), and hence the reaction to send stocks plummeting and bond yields rising in the U.S. didn't really make perfect sense to us.
As previously mentioned, what matters is how the market reacted and from our personal outlook, just how the order books reacted.
That's where it starts to get really interesting.
EUR/USD
We still hold our 1.2910 longs in this pair, but Thursday saw good progress towards a reversal in the market.
Initially, on the first drop lower in the euro, retailers sold the currency heavily and we got slightly nervous. Once the 1.33 level was breached, a flood of buyers entered the market, most likely through stops as well as actual buyers.
The key as per our title is in the follow through. Ideally this will take the form of a correctional bounce on Thursday and possibly Friday for better selling position into next week.

Despite the overly aggressive moves into the close, the Daily chart indicates that this merely brings us back towards a current support level.
If Retail Traders use these support levels to buy the pair, we could see our turning point we have been looking for.

GBP/USD
The pound really crashed on the U.S. Dollar strength. Similar to the euro, this is close to a turning point and we look for the same strategy.
We prefer holding our longs into Thursday's Retail Sales figures though, as a better than expected number could fire this pair back up. A weak number will be interesting to see market reaction.

A push back up to the 1.5600 level on the Daily could offer us the value area for shorts. Watch out for Thursday's U.K. Retail Sales.

AUD/USD
The Aussie basically died during the FOMC statement. Our system put us short earlier in the day, and we managed to capture 200 pips easily on the trade. The one positive on this move was the aggressive buying of the pair though the leg lower by Retail Traders.
This does however put us at ultra extremes, and we really like the potential for a push lower to clear out few extra longs - then a bounce and push higher.

The daily chart really shows how aggressive Retail Traders are in this market. Spikes to this level normally see a reduction in long positions which could see a move higher.

USD/CHF
The pair has been flirting with longs. Just like the euro - if we see a retracement Thursday or Friday this could offer a potential long entry with order books breaching the extreme levels, where we might see some closing of long trades.

SNB's Jordan is due to talk Thursday, which could be key for this pair. Watch for talk of potentially raising the EUR/CHF peg or an actual USD/CHF peg.

Similar to Aussie the extreme levels in the order book would typically result in a reversal of some kind, and therefore a correction lower could offer good value for long entries.
EUR/AUD
Obviously this pair can be worked out by proxy with the above data, but we have decided to start tracking it here for you.
We have been long this pair, and the spike on Wedneday helped that position. Like most other pairs we suspect the extremes in the order book to start coming off, and we are really looking for a turn and move lower. The pair breached the recent highs on Wednesday, and we could see this as a bit of a Bull trap for a move lower soon, if we get the follow through on the euro and Aussie.