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Fundamental Trading Strategies. Picking The Strongest Pairing
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Picking the Strongest Pairing

… because at the time, Britain's economy had been exhibiting a consis­tent, impressive amount of economic growth, which, after the compulsive dollar frenzy, helped it gain hack some substantial ground within a matter of a few weeks. The rebound in the British pound against the dollar can be seen in Figure 9.1. After hitting a low of 1.8595 on March 28, the pair pro­ceeded to rebound back toward its pre-FOMC level of 1.9200 over the next three weeks.

Figure 9.1 GBP/USD Post Fed Meeting

( Source: eSignal. www.eSignal.com)

On the other hand, the Japanese yen saw a depreciation over a much longer period of time with a continual upward movement in the USD/JPY pair well into the middle of April. This price action can be seen in Figure 9.2. After the FOMC meeting, the dollar proceeded to strengthen another 300 pips over the next two weeks. Part of the reason for the differences in these movements was that market watchers did not have much faith in the Japanese economy, which had been teetering on the edge of recession and showing no signs of positive economic ex­pansion. Therefore, the dollar strength had a much higher impact and an increased amount of staying power with the struggling yen than with the consistently strong pound.

Figure 9.3 AUD/JPY Post Fed Meeting

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