- Federal Open Market Committee (FOMC) to Release Updated Forecast
- Fed Chairman Ben Bernanke to Hold Press Conference at 18:30 GMT
Trading the News: Federal Open Market Committee Meeting
A material shift in the Federal Open Market
Committee’s (FOMC) policy may prop up the U.S. dollar as market
participants see the central bank scaling back its bond-purchasing
program to $40B in September.
What’s Expected:
Time of release: 09/18/2013 18:00 GMT, 14:00 EDT
Expected: $40B
Previous: $45B
DailyFX Forecast: $30B to $45B
Why Is This Event Important:
Indeed, there are three possible outcomes (taper, no
taper & no taper with more detailed exit strategy), all of which
will set the near-term outlook for the U.S. dollar , but the more
encompassing market reaction may take shape following Chairman Ben
Bernanke’s press conference should the central bank head continue to
call for an end of quantitative easing in 2014.
Expectations: Bullish Argument/Scenario
Release
|
Expected
|
Actual
|
ISM Non-Manufacturing (AUG)
|
55.0
|
58.6
|
ISM Manufacturing (AUG)
|
54.0
|
55.7
|
Gross Domestic Product (Annualized) (QoQ) (2Q P)
|
2.2%
|
2.5%
|
The updated forecasts (growth, inflation &
interest rate) from the Fed may highlight a stronger recovery for the
U.S. economy, and any comments showing a greater willingness to
implement the exit strategy ahead of schedule may generate a sharp rally
in the dollar as market participants see higher interest rates on the
horizon.
Risk: Bearish Argument/Scenario
Release
|
Expected
|
Actual
|
Consumer Price Index (YoY) (AUG)
|
1.6%
|
1.5%
|
Change in Non-Farm Payrolls (AUG)
|
180K
|
169K
|
Personal Consumption Expenditure Core (YoY) (JUL)
|
1.3%
|
1.2%
|
Nevertheless, the Fed may show further support for
its highly accommodative policy stance amid the threat for deflation,
and signs of a delay in the exit strategy may trigger a marked decline
in the reserve currency as central bank dove Janet Yellen inches closer
to taking the chairmanship.
How To Trade This Event Risk(Video)
BullishUSD Trade: FOMC Tapers QE and/or Lays More Detailed Exit Strategy
-
Need red, five-minute candle following the print to consider a short EURUSD trade
-
If market reaction favors a long dollar trade, short EURUSD with two separate position
-
Place stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
-
Move stop to entry on remaining position once initial target is hit, set reasonable limit
Bearish USD Trade: QE Stays at $85B; Fed Supports Current Policy
-
Need green, five-minute candle to favor a long EURUSD trade
-
Implement same setup as the bullish dollar trade, just in opposite direction
Potential Price Targets For The Rate Decision
EURUSD
Chart - Created Using FXCM Marketscope 2.0
-
Breaks Out of Downward Trend; Yet to Fill Sunday Gap Open
-
Bearish Divergence in Relative Strength Index Remains Intact
-
Interim Resistance: 1.3370 (100% Fib expansion) to 1.3380 Pivot
-
Interim Support: 1.3150 (38.2% Fib retracement) to 1.3180 Pivot
Impact that the FOMC Interest Rate Decision has had on USD during the last release
Period
|
Data Released
|
Estimate
|
Actual
|
Pips Change
(1 Hour post event )
|
Pips Change
(End of Day post event)
|
JUL 2013
|
07/31/2013 18:00 GMT
|
0.25%
|
0.25%
|
+45
|
+12
|
July 2013 Federal Open Market Committee Interest Rate Decision
The FOMC sounded rather dovish after maintaining its
current policy in July as the central bank continued to highlight the
threat of subdued inflation, but it seems as though that a growing
number of central bank officials are becoming increasingly upbeat
towards the economy as the committee sees a stronger recovery ahead.
Nevertheless, the dollar struggled to hold its ground following the
policy statement, with the EURUSD pushing above the 1.3325 region, but
we saw the pair consolidate going into the close as the euro-dollar end
the day at 1.3300.
--- Written by David Song, Currency Analyst
To contact David, e-mail dsong@dailyfx.com
Follow me on Twitter at @DavidJSong
