USD sentiment shifts after FOMC holds rates

Forex sentiment update

This afternoon's FOMC meeting sent price action into USD pairs despite an expected pause in rate hikes from the Fed. Fed Chair Powell alluded to the possibility of an additional rate hike before the year is over - speaking directly to the FOMC's ability to adapt each meeting pending the continual release of economic data.

More central bank meetings decide rates tomorrow that will likely change client sentiment further. Sentiment in GBP/USD is up to 70% long ahead of the Bank of England's decision tomorrow morning.

How client sentiment works

Client Sentiment shows the percentage of tastyfx client accounts with open positions that are currently long or short. If the majority of client accounts with open positions are long a given market, then they expect the price to rise; if the majority is short, then they expect it to fall. (Values taken using tastyfx's Client Sentiment measure as of the previous day's close.)

Trend followers might go with sentiment, while contrarians would tend to go against the trend. For example, a 65% long measure in EUR/USD could reflect a buying opportunity for trend followers or a selling opportunity for contrarians.

EUR/USD sentiment - 66% long

Last week's sentiment: 64% long

Long euro sentiment gained slightly week-over-week after EUR/USD fell below 1.0700 last Thursday. The ECB's decision to raise rates likely for the last time this year sent the pair lower - and staying below 1.0700 this afternoon.

GBP/USD sentiment - 70% long

Last week's sentiment: 63% long

Seven out of ten traders are now long GBP/USD as the pair trades below 1.2350 for the first time since the end of May. A 25 bps hike is expected from the BoE tomorrow, but GBP strength may depend on dovish vs hawkish language - similarly to the ECB and the euro last week.

USD/JPY sentiment - 76% short

Last week's sentiment: 73% short

Short USD/JPY sentiment builds further after seeing a new year-to-date high in the pair today. Currently over 148.00, USD/JPY is at its highest level since November 2022.

USD/CHF sentiment - 65% long

Last week's sentiment: 69% long

USD/CHF has closed higher each of the past seven days - nearing 0.9000. The Swiss National Bank meets tomorrow morning with a 25 bps raise expected.

AUD/USD sentiment - 74% long

Last week's sentiment: 78% long

Australian dollar sentiment is still majority long despite trading above 0.6400 this week. AUD/USD fell over 50 pips following the FOMC meeting.

USD/CAD sentiment - 52% long

Last week's sentiment: 59% short

Sentiment in USD/CAD flips from short to long week-over-week after falling below 1.3500. USD/CAD has fallen over 200 pips in the past 14 days.

*Client sentiment data as of 4:00pm ET 9/20/23

How to trade client sentiment

1. Open an account to get started, or practice on a demo account

2. Choose your forex trading platform

3. Open, monitor, and close positions on forex pairs

Trading forex markets using client sentiment requires an account with a forex provider like tastyfx. Many traders watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on client sentiment. Contrarians might go against the prevailing sentiment in a forex pair, while trend followers might go with it.

You can help develop your forex trading strategies using resources like tastyfx’s Learn Center. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.