T-Minus 30 Minutes Until The FOMC-USD Index In Focus

With the FOMC announcements only a half-hour away, the USD is holding its own against the majors. Statements from the U.S. Federal Reserve Chair Janet Yellen have the ability to change this, but for now, all is calm.

Here are a few things to look for from the FOMC release at 2:00 PM EST:

• Comments alluding to an “unwinding” of the FED’s balance sheet

• Inflation performance in regards the 2% target

• Hints at a December raising of interest rates

Remember that the current odds being assigned to a December rate hike are over 95%. Any statements from Yellen regarding holding rates static for the foreseeable future will immediately be priced into the USD valuations.

A Look At The USD Index

The recent surge of the greenback is illustrated clearly by the performance of the USD index for December.

December USD Index Futures, Daily Chart

Although I do not trade the USD index, it is a valuable tool in putting the relative strength of the dollar in the proper context. A few observations:

• Current trade is above the 38% retracement of October’s range. This is a bullish signal and one that may remain intact if the FED hints at tightening policy.

• The October high of 95.060 is slightly above the 62% retracement of the contract’s range. In the event that the USD breaks higher from this level, we will see a robust recovery against the majors for the latter part of 2017.

Overview

No matter how sure one is, it always tests the nerves when FED Chair Yellen issues a formal statement. Markets often react chaotically to the smallest of details.

I am becoming redundant, but if you are going to trade the news stay safe. Make sure your stop losses are resting at market before the announcements.

Caution is a good word. Let’s trade the FOMC statements safely and come out the other side ready to capitalise on high probability trade setups.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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