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Forex Analysis (Tue September 21 2010, 2:15pm NY Time EDT) - US FOMC Interest Rate

Discussion in 'Current Forex Trading Signals' started by Henry Liu, Sep 21, 2010.

  1. Henry Liu

    Henry Liu Former FPA Special Consultant

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    The FOMC will be releasing a statement regarding future monetary direction along with the Federal Funds Rate decision, which is expected to be kept at the current level of 0.25%.

    Historical chart and data on FOMC Meeting Statement.

    The focus of the market in the past few weeks has been on the speculation of further monetary easing by the Feds in the form of expanding its balance sheet by introducing another Quantitative Easing measure, or QE II (II being the second one).

    The very fact that U.S. economy still needs this additional measure has driven the USD lowest in recent weeks, pushing the EURUSD above the 1.3100 level, breaking above the resistance at 1.2900. This meeting is likely to either add more momentum to EURUSD and push it towards the 1.3300, or we may see a reversal in the market and 1.2800 may be tested in the next few weeks...

    The key focus is on the famous FOMC Statement... And here are some scenarios that could take place:

    1. FOMC keeps rates unchanged, keeps the statement "extended period" - Market should react favorably for the USD.
    2. FOMC keeps rates unchanged, drops the statement "extended period" - Market will react violently towards buying USD as this signals possible rate hike... a complete 180 degrees change in direction from recent speculation.
    3. FOMC keeps rates unchange, keeps the statement "extended period", and increase the balance sheet by large scale asset purchases from 600 Billion to 1 Trillion - Market will sell off USD, we should BUY EURUSD, GBPUSD, etc... Broad market weakness in the USD.
    4. FOMC keeps rates unchanged, keeps the statement "extended period", and increases current balance sheet to 100 ~300 Billion - Market should remain slightly bearish for the USD... but remember the past few weeks USD has been heavily devalued from speculation of a 1 Trillion dollar asset purchase, we may actually see some "buy on rumor, sell on news" reaction as traders buy USD back.
    5. FOMC keeps rates unchanged, keeps the statement "extended period", and announces that it's evaluating the potential of buying more assets - Market will be confused, but should be somewhat positive for the USD as anything short of a straight out large scale purchase, USD should remain strong.

    Of course, market may ultimately do what it wants to do as there are institutions waiting on the FOMC Statement before jumping in the market, and those order flows may skew the general sentiment temporarily, but market should move in the direction of the statement gradually and steadily until the next high impact data changes the sentiment.

    Here are some of the Q&A by Bloomberg to 64 Analysts:

    1. At the FOMC’s Sept. 21 meeting, will the committee decide to (choose one):

    a) Retain the current policy of keeping a constant level of the Fed’s securities holdings by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities
    b) Increase the level of securities holdings through an accelerated pace of asset purchases
    c) take a different action on the balance sheet. Please be specific.

    Result (64 replies): A, 60; B, 3; C, 1.

    2. Will the FOMC statement following the Sept. 21 meeting include any changes to the following sentence: “The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Yes or no.

    Result (63 replies): Yes, 9; 54, no.

    3. Will the Fed decide at the Sept. 21 meeting to reduce the 0.25 percent interest rate on excess reserves? Yes or no.

    Result (63 replies): Yes, 4; 59, no.

    Most analysts believe that the Feds will keep rates the same, keep the extended period phrase, and keep the current balance sheet unchanged... This should result in a consolidation of recent gains in CHF, EUR, AUD, and push USDJPY above the 87.50 level...


    Thanks,


    [​IMG]
     
    #1 Henry Liu, Sep 21, 2010
    Lasted edited by : Sep 8, 2016
  2. adams1

    adams1 Private

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    where to get the FOMC statement live as when it is released

    Dear Henry,
    The Problem now is when the FOMC statement will be made where will i get the live news so that i can trade the statement released.
    I will be very grateful if this is solved by you for me.I am waiting your reply.
    Thanks
    Adamson Erha
     
  3. kasfulfx

    kasfulfx Recruit

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    FOMC release time

    6:15pm GMT.
     
  4. onenikos

    onenikos Corporal

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    Waiting FOMC

    Dear Liu,
    I always thought that there must be some people out there that have advanced inside info on the outcome of such things as the FOMC. Thus to me it is interesting that (a) Japan started buying USD when they did and stopped intervening further after that. To my mind the outcome will naturally shoot the usdjpy without the need for further intervention. Just a thought....I will await with interest the NY open.
     
  5. wilson silveira

    wilson silveira Recruit

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    Wow! What an excellent analysis! It's unbelievable the things what we get for free and give for granted.the least I could do is give you and this site a big thanks.
     
  6. andyhawes

    andyhawes Recruit

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    Try this:

    http://www.tradethenews.com/

    or for free:

    | NewsStrike.com |

    :)
     
  7. immi

    immi Private

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  8. adams1

    adams1 Private

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    Thanks sir for your effort to give me this two links www.tradethenews.com and | NewsStrike.com | but the problem now is the registration process which is pointing to the fact that I will not be able to use the site in the FOMC release today.Is there no other alternative for this problem sir.
    I am expecting your reply.

    Thanks
    Adamson Erha
     
  9. swingfiddle

    swingfiddle Private

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    what was the release of the fomc that made the dollar fall like a brick?i guess whoever traded usd/jpy did a very good decision..over 200 pips..
     
  10. Heriberto Dominguez

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    FOMC keeps rates unchanged, keeps the statement "extended period", and announces that it's evaluating the potential of buying more assets - Market will be confused, but should be somewhat positive for the USD as anything short of a straight out large scale purchase, USD should remain strong.


    this is what it took place today, but the market actually sold off usd
     

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