Wednesday May 18, 2016 - 10:55:11 GMT
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Alert: How to Trade the FOMC Minutes
The FOMC minutes, due at 18:00 GMT today, should be a non-event as it is old news but as most of us know, markets tend to move on such events. The tendency is to look for comments that support the current market view and react sharply if there is a surprise that negates that view.
The setup for the FOMC minutes came yesterday when markets paid notice to hawkish comments from the Fed’s Williams and Lockhart. It wasn’t what they said as this was nothing new but that markets paid attention to it and increased expectations of a Fed rate hike this year.This saw the dollar firm and stocks fall, setting the stage for the release of FOMC minutes.
It is important to recognize that markets trade on expectations of future monetary policy more than current monetary policy. In this regard, traders will be looking for any hints that raise the risk of a sooner rather than later Fed rate hike and whether a June rate hike is back on the table. This suggests the dollar should find support ahead of the minutes although it has already firmed in anticipation.
It is a crap shoot following the meeting as it is doubtful that there will be a clear signal as that would have come from the FOMC statement following the meeting. However, the shift in expectations suggests those reading the tea leaves will be looking for any hints of a sooner rather than later rate hike risk. Looking at the EURUSD, expect 1.1250 to be pivotal, key support, a target by many is at 1.1200-10, only above 1.1300 would fully neutralize the risk.
Visit the Global-View Forex Forum at http://www.global-view.com to see the reaction to the FOMC minutes and latest expectations for Fed funds.
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