FOMC Meeting This Wednesday Increasing Interest Rate

After a long time, FOMC Meeting scheduled this Wednesday is most likely to increase the interest rates in US. FOMC makes the decision on the FED Fund Rate. This is a the short term interest rate rather an overnight interest rate that banks and financial institutions pay to each other to cover the reserve requirements at the FED. By changing this overnight interest rate FED sets in motion a ripple effect in the economy that affects all the short term, medium term and long term interest rates in the US economy. Read the post on what happened to gold in the last FOMC Meeting.

FOMC Meeting

As you can see in the above screenshot GBPUSD is ambivalent right now. It is not going to move much as long as the situation doesn’t become clear to the market. If it becomes clear to the market that FOMC is definitely going to increase interest rate, you will see a 400-500 pip down move by GBPUSD. When USD appreciates and becomes strong as a result of increase in interest rate, it will force GBPUSD go down. This can be a good swing trade if we can find a low risk entry. The problem is most of the time just minutes after FOMC Meeting, market becomes highly volatile most of the time hitting the stop loss. So if we can find a low risk entry with a stop loss something like 10-15 pips, we can make an entry and then wait for the market to show what it thinks. Read this post on a swing trade that made 400 pips in just 72 hours.

After watching this video you should know that we live in a world that is full of contradictions. Understanding these contradictions will help you understand how the market works and behaves. Did you read the post on the recent US Presidential Election trade? US Presidential Election Day was great for trading. It was a highly volatile day. First the market went up, then it went down then it again reversed and went up as the news changed from Hillary winning to Trump winning. Volatility in the market is what gives us good trades. So don’t be afraid of volatility. Just make sure that you keep the risk low and don’t get into a market with a big stop loss. This is how you are going to defeat and harness volatility to build you a great fortune. Read this post on a recent NFP Report trade.

So tomorrow if FOMC Meeting decides to increase interest rates and then makes a hawkish statement something like we are going to increase the rates further in the near future, expect a big 400-600 pips down movement for most USD pairs like EURUSD, GBPUSD, NZDUSD, AUDUSD etc and a 400-600 pips up movement for pairs like USDJPY, USDCAD etc.