Candles Reflecting Market Sentiment
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Discussion:
The above candles (5 minute charts) came from the FOMC interest rate announcement on Tuesday 8/08/06. The USD/CHF shows a morning star pattern soon followed by an evening star. The GBP/USD shows just the opposite. One lesson I have had to learn the hard way is that your own interpretation of the news is not what is important ... It is what the Market thinks about the news. The initial red candle (USD/CHF) is the market's reaction to the FOMC pause on interest rate hikes. This is followed soon by a shift in market sentiment (hammer) and a reversal (green candle) as indicated by the morning star pattern. This was the market's reaction to the wording surrounding the rate hike pause (ie promise of further rate hikes soon in the fall). This sentiment, however, was not too long lasting either (spinning top) as the green candle soon reversed as indicated by the evening star. Just the opposite occured with the GBP/USD currency pair. This was a nice display of some really pretty spinning tops and a hammer.
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posted by John Mericle M.D. D.A.B.R. @ 6:08 PM
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