TheNews

Trading the News: Federal Open Market Committee (FOMC) Federal Funds Rate Decision

Even though the Federal Open Market Committee (FOMC) is widely expected to retain its current policy in March, the updated forecasts for growth, inflation and the interest rate may instill a bullish outlook for the U.S. dollar should the central bank stay on course to implement higher borrowing-costs in 2016.

What’s Expected:



Why Is This Event Important:

The FOMC may continue to prepare U.S. households and businesses for higher interest rates especially as the economy approaches ‘full-employment,’ and the central bank may sound more hawkish this time around as Chair Janet Yellen remains confident in achieving the 2% inflation-target over the policy horizon.

However, waning confidence paired with subdued wage growth may prompt to Fed to adopt a more cautious tone this time around, and the dollar stands at risk of facing near-term headwinds should the central bank show a greater willingness to further delay the normalization cycle.

How To Trade This Event Risk
Bullish USD Trade: FOMC to Stay on Course to Further Normalize Policy in 2016

• Need red, five-minute candle following the rate decision to consider a short EUR/USD position.
• If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position.
• Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: Fed Curbs Expectations for Higher Borrowing-Costs

• Need green, five-minute candle to favor a long EUR/USD trade.
• Implement same strategy as the bullish dollar trade, just in the opposite direction.

Potential Price Targets For The Release
EURUSD Daily

• Indeed, the diverging paths for monetary policy fosters a long-term bearish outlook for EUR/USD especially as the European Central Bank (ECB) continues to push monetary policy into uncharted territory, but the pair appears to be carving out a bullish-flag formation (continuation pattern) as it holds above the range from earlier this month.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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