FOMC Forex and Commodity entries


16 March, AtoZForex, Amsterdam – FOMC meeting stands for the Federal Open Market Committee meeting, but for traders it stands for Market Volatility! In today’s live market analysis we look into FOMC Forex and Commodity opportunities.

Fundamentally the following are what traders as well as investors globally will be looking for from today’s FOMC meeting results as well as the FOMC press conference afterwards:

Until now, low crude oil prices were the main driver behind the deflation fears which not only the FED but also the rest of the central banks feared all over the world. As the WTI crude oil has tested the $40 per barrel level for the first time since 7th of December 2015, investors will be looking for the FED to comment about the inflation expectations and look for the answer to the key question:

“Do the FED members expect to reach their 2% inflation targets?”

Next to look for is the rate hike. Let’s make it clear!

No rate hike in this meeting!

Yes, I am 99% sure that there will not be any rate hike as a part of this meeting’s results. The Federal Reserve will keep interest rates unchanged in a range of 0.25% to 0.5%. However, the attention is anyway not for the immediate decisions, but what coming up on the long run?! Before the end of the year in 2015, economists started to speculate about 4 rate hikes in a year in 2016, that is what is going to create the main smoke for the day today. This is what pushed the USD rally in 2015 in any case, creating a major divergence between the Fed and the rest of the central banks, especially with the BOJ , BoE and ECB, For this time. the survey shows that most economists expect the FED chair Janet Yellen to hint at two interest rate hikes to come in 2016.

What to expect from the FED?

Traders all wonder about what to expect from the FED? What are the FOMC Forex opportunities? And lastly how to trade these opportunities? Thus we simplify the opportunities here and look for the FED’s signal on rate hike (I don’t expect a rate hike soon).

Thus may the Fed hint that there will be less than 2 hikes in 2016 the following is how the market will react:

InstrumentDirectionReason
EURUSDBullish Market has discounted the FED rate hike. Each surprize puts the USD under pressure. It is likely that we would also be seeing a roller-coaster effect in the market.
GBPUSDBullish
AUDUSDBullish
NZDUSDBullish
GoldBullish
Crude OilBullish
USDJPYBearish
USDCADBearish

Thus may the Fed hint that there will be more than 2 hikes in 2016 the following is how the market will react:

InstrumentDirectionReason
EURUSDBearish then Bullish Market has discounted the FED rate hike. The reaction would likely to come in two steps first the immediate reaction and then post conference reaction completely opposite to the first reaction.
GBPUSDBearish then Bullish
AUDUSDBearish then Bullish
NZDUSDBearish then Bullish
GoldBearish then Bullish
Crude OilBearish then Bullish
USDJPYBullish then Bearish
USDCADBullish then Bearish

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