My Idea on FOMC USD rate hike decision for EURUSDSo the time is coming, this is the last chance for the FED to demonstrate that the US economy is strong enough to withhold an interest rate hike and continue to show improvements.
there are many political and idealogical factors behind this decision and this is a worry to investors and speculators that think this rate hike should not go ahead and that is only happening because of NON economical influences.
lets see first, prior to the 16th meeting >>>
the pair could well continue its bullish momentum, revisiting the high of 1090 and even penetrating all the way to the 1200 area where the down trend of this year has been established.
also prior to the result and news release, some big brokers and desks will take positions to ensure they have enough liquidity to provide dollars to those who will buy it, so this will produce a few big EUR orders.
Take a look at the CME options expiring at the NY cut, this will give you a good idea of what level is the market expecting.
WITHIN THE MEETING/DECISION
the key word here is VOLATILITY, while traders and brokers decide whether the statement is hawkish or dovish, you will probably see some spikes up and down as they hedge/cover and close their positions currently open.
no one will open brand new positions during the event unless is to cover their large contracts to prevent losses
here is when you need to be careful with your SL, if this is hit during the event then stay out until you can clearly asses the decision. bear in mind that experts analysts have great tools that electronically analyse the statement and is capable to identify different words and highlight this for the banks so their capacity of response is going to be pretty big nevertheless unlimited.
AFTER THE DECISION
here is when new positions will be opened, as liquidity returns and new players enter the market, big banks will look to find out how the decision affects their long term outcome and new positions could be undertaken over the next few days.
looking at where the initial spike ends up you can get an idea if the outcome was scenario A B or C but still.. this may not probe to be the case and the pair may reverses within a few days of the initial euphoric move.
SO IN SUMMARy
- Prior to the event, keep an eye on positioning
- during the event, volatility could kill your positions, ensure you are covered
- after the event, reach the same conclusion than the big traders is essential, load yourself up with good news provider
- if you are not sure, or you have no capital, or you feel insecure about trading in historic events, please do not trade this event.
HAPPY TRADING
HAPPY XMAS!
any questions, please ask below :)
