Forex: EUR/USD- Trading the Fed’s (FOMC) Interest Rate Decision

RELATED QUOTES

SymbolPriceChange
EURUSD=X1.1240+0.0021

Trading the News: Federal Open Market Committee Meeting

What’s Expected:

Time of release: 12/12/2012 17:30 GMT, 12:15 EST

Primary Pair Impact: EURUSD

Expected: 0.25%

Previous: 0.25%

DailyFX Forecast: 0.25%

Why Is This Event Important:

There’s speculation that the Federal Open Market Committee (FOMC) will expand its open-asset purchase program beyond the $40B monthly limit as ‘Operation Twist’ comes to an end, but we may see the central bank carry its current policy stance into the following year as the fundamental outlook for the world’s largest economy improves. Indeed, Fed Chairman Ben Bernanke sounded rather upbeat for 2013 amid the more broad-based recovery, and we may see the central bank start to slowly move away from its easing cycle as the recovery gradually gathers pace.

Recent Economic Developments

The Upside

Release

Expected

Actual

Consumer Credit (OCT)

$10.000B

$14.158B

Change in Non-Farm Payrolls (NOV)

85K

146K

Housing Starts (MoM) (OCT)

-3.7%

3.6%

The Downside

Release

Expected

Actual

U. of Michigan Confidence (DEC P)

82.0

74.5

Personal Income (OCT)

0.2%

0.0%

Advance Retail Sales (OCT)

-0.2%

-0.3%

As the ongoing expansion in private sector credit paired with the budding recovery in the housing market highlights an improved outlook for growth, we may see the FOMC carry a wait-and-see approach into the following year, and a shift in the policy outlook should instill a bullish forecast for the USD as market participants scale back bets for more quantitative easing. However, subdued wage growth along with the slowdown in private sector consumption may prompt the Fed to encourage a stronger recovery, and we way see a sharp selloff in the greenback should the committee take additional steps to shore up the region.

Potential Price Targets For The Rate Decision

Forex_EURUSD-_Trading_the_Feds_FOMC_Interest_Rate_Decision_body_ScreenShot102.png, Forex: EUR/USD- Trading the Fed’s (FOMC) Interest Rate Decision

As former trendline resistance appears to be acting as new support, speculation for more easing may spark another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, and the EURUSD may continue to retrace the decline from earlier this year should the FOMC carry its easing cycle into the following year. However, as Chairman Bernanke softens his dovish tone for monetary policy, we may see the central bank scale back his willingness to expand the balance sheet further, and a less-dovish policy statement may initial a more meaningful move towards the 23.6% Fib (1.2640-50) as the Fed looks to conclude its easing cycle.

How To Trade This Event Risk

Trading the given event risk may not be as clear cut as some of our previous trades as the Fed keeps the door open to expand its balance sheet further, but the statement accompanying the rate decision could set the stage for a long U.S. dollar as should the central bank strike a more neutral tone for monetary. Therefore, if the FOMC keeps the open-ended asset purchase program at $40B a month and raises its fundamental outlook for the region, we will need a red, five-minute candle following the announcement to establish a sell entry on two-lots of EURUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to lock-in our profits.

On the other hand, the Fed may take additional steps to foster a stronger recovery amid the ongoing turmoil in the world economy, and the central bank may keep the door open to expand its balance sheet further in 2013 in an effort to encourage a stronger recover. As a result, if the FOMC offsets the expiration of ‘Operation Twist’ and sees scope for additional monetary support, we will implement the same strategy for a long euro-dollar trade as the short position laid out above, just in the opposite direction.

Impact that the FOMC Interest Rate Decision has had on USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

OCT 2012

10/24/2012 18:15 GMT

0.25%

0.25%

+6

+13

October 2012 Federal Open Market Committee Interest Rate Decision

Forex_EURUSD-_Trading_the_Feds_FOMC_Interest_Rate_Decision_body_ScreenShot101.png, Forex: EUR/USD- Trading the Fed’s (FOMC) Interest Rate Decision

Indeed, the FOMC maintained the 2015 pledge for its zero-interest rate policy amid the ‘moderate’ recovery, and held a relatively dovish tone for monetary policy as the fundamental outlook remains clouded with ‘significant downside risks.’ As the Fed keeps the door open to expand its balance sheet further, the cautious outlook held by the FOMC pushed the EURUSD back towards the 1.2975 figure, and the greenback struggled to regain its footing during the North American trade as the pair closed at 1.2972.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com.

Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, please follow this link.

New to FX? Watch this Video

Questions? Comments? Join us in the DailyFX Forum

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Business Highlights Associated Press - 3 minutes 52 seconds ago

    ___ Malls, stores consider new ways to protect shoppers More sophisticated cameras. Security robots. Customers feeling shaken by recent attacks at U.S. malls may not notice huge changes — but mall operators ... … More »

  • The Latest: NTSB says probe into train crash is progressing
    The Latest: NTSB says probe into train crash is progressing Associated Press - 5 minutes ago

    The Latest on a commuter train that crashed into a station in New Jersey, killing one person and injuring more than 100 others (all times local): 5:30 p.m. Federal investigators say the probe into a train ... … More »

  • Hammond says Brexit deal should not harm economy - Telegraph
    Hammond says Brexit deal should not harm economy - Telegraph Reuters - 16 minutes ago

    LONDON (Reuters) - British controls on immigration following the country's referendum decision to leave the European Union must not be damaging for the economy, Finance Minister Philip Hammond was quoted ... … More »

  • Trump vs Miss Universe: White House race hits new low
    Trump vs Miss Universe: White House race hits new low AFP News - 37 minutes ago

    Donald Trump urged voters on Friday to check out the supposed "sex tape" of a former Miss Universe backing his rival Hillary Clinton, provoking the Democrat to label him "unhinged" in a surreal new turn to the White House race. In a pre-dawn … More »

  • IMF leader cites 'historic milestone' for China Associated Press - 38 minutes ago

    Christine Lagarde, the managing director of the International Monetary Fund, is calling the inclusion of China's renminbi as the fifth currency in an elite group of the world's reserve currencies an "important ... … More »

  • Data storage provider Nutanix soars in market debut
    Data storage provider Nutanix soars in market debut Reuters - 39 minutes ago

    After getting strong encouragement from investors, the company kept nudging up the asking price for shares from the $11 to $13 range set early last week, co-founder and Chief Executive Officer Dheeraj Pandey said in an interview on Friday. … More »

  • Municipal-bond week in review: Yields sag then finish strong Associated Press - 42 minutes ago

    Yields on municipal and Treasury bonds sagged this week on concerns about the health of Germany's largest bank, before retracing their steps on Friday. The 10-year yield on the AP Municipal Bond index ... … More »

  • Investigators question engineer in deadly train crash
    Investigators question engineer in deadly train crash Associated Press - 51 minutes ago

    Federal investigators trying to figure out the cause of the deadly rail crash at the Hoboken station questioned the engineer Friday and hoped to lift clues from the train's black box recorders, though ... … More »

  • Nutanix exceeds expectations in upsized IPO Reuters - 1 hour 14 minutes ago

    San Jose, California-based Nutanix's share price exceeds the $13.40 value last placed on its shares in a 2014 funding round, an upgrade encouraging for the many unprofitable technology companies that, like Nutanix, have been weary of testing public … More »

  • US stocks rally on Deutsche Bank deal AFP - 1 hour 18 minutes ago

    US stocks rose strongly Friday as financial shares surged on news that Deutsche Bank was near a settlement with US regulators over its sale of toxic mortgage bonds before the financial crisis. US-traded ... … More »

  • How the Dow Jones industrial average fared on Friday Associated Press - 1 hour 20 minutes ago

    U.S. stocks climbed Friday as banks made a rapid recovery following a steep fall a day ago. Investors hoped Deutsche Bank and the financial system in general were in better shape than they had feared. ... … More »

  • Global stocks jump, euro edges up as Deutsche Bank rebounds
    Global stocks jump, euro edges up as Deutsche Bank rebounds Reuters - 1 hour 34 minutes ago

    By Richard Leong NEW YORK (Reuters) - Stock prices across major markets rose on Friday, while the euro stabilized as Deutsche Bank's shares recovered from record lows on a report it is close to a deal ... … More »

  • Dutch summon Russian ambassador over MH17 comments
    Dutch summon Russian ambassador over MH17 comments AFP News - 1 hour 35 minutes ago

    Dutch Foreign Minister Bert Koenders has summoned Russia's ambassador over "unacceptable" comments by Moscow criticising a report into the downing of flight MH17, officials said on Friday. "Responding to the presentation of the initial findings... … More »

  • Oil up second straight month on OPEC-fuelled rally
    Oil up second straight month on OPEC-fuelled rally Reuters - 1 hour 35 minutes ago

    Oil prices settled mixed on Friday while posting their second straight monthly gain on OPEC's planned output cuts, even as scepticism about the cartel's pledge grew after data suggested another record high in its production. Brent crude settled up … More »

  • Stocks jump, euro edges up as Deutsche Bank rebounds
    Stocks jump, euro edges up as Deutsche Bank rebounds Reuters - 1 hour 37 minutes ago

    By Richard Leong NEW YORK (Reuters) - Stock prices across major markets rose on Friday, while the euro stabilized as Deutsche Bank's shares recovered from record lows on a report it is close to a deal ... … More »

  • Oil rises in New York, buoyed by OPEC cheer
    Oil rises in New York, buoyed by OPEC cheer AFP News - 1 hour 49 minutes ago

    Oil prices finished higher in New York on Friday, two days after producing countries reached the consensus needed for a production cut. On the New York Mercantile Exchange, a barrel of West Texas Intermediate for November delivery gained 41 cents … More »

  • US stocks rally as Deutsche Bank surges AFP - 1 hour 53 minutes ago

    US stocks rose strongly Friday on news that Deutsche Bank was close to a settlement with US regulators over its sale of toxic mortgage bonds before the financial crisis. US shares of Deutsche surged 14.1 ... … More »

  • Markets Right Now: Bank stocks lead a rebound on Wall Street Associated Press - 1 hour 56 minutes ago

    The latest on developments in global financial markets (all times local): 4:00 p.m. Stocks are closing higher on Wall Street, led by big gains in bank stocks. Financial stocks were bouncing back Friday ... … More »

  • Grain higher, livestock lower Associated Press - 2 hours 6 minutes ago

    Grain futures were lower Friday on the Chicago Board of Trade. Wheat for Dec. rose 3 cents at $4.02 a bushel; Dec. corn advanced 7.50 cents to 3.3675 a bushel; Dec. oats was up 2.25 cents at $1.7825 a ... … More »

  • Chinese yuan set to join IMF's elite currency basket
    Chinese yuan set to join IMF's elite currency basket AFP News - 2 hours 23 minutes ago

    China's yuan is poised to enter the International Monetary Fund's elite SDR basket of currencies, elevating Beijing's banknotes into a family long exclusive to global reserve assets. A symbolic coup for policymakers in Beijing, the move represents … More »

  • Canada's Fiera buys Charlemagne Capital, eyes more deals Reuters - 2 hours 31 minutes ago

    Canadian asset manager Fiera Capital (FSZ.TO) announced it has bought London-based Charlemagne Capital (CHAR.L) for 40.7 million pounds ($52.8 million) and said it is in talks with several other targets. The Montreal-based firm wants to have C$200 … More »

  • IMF sets new SDR currency amounts to reflect Chinese yuan entry
    IMF sets new SDR currency amounts to reflect Chinese yuan entry Reuters - 2 hours 40 minutes ago

    The International Monetary Fund said on Friday it set new relative amounts of the currencies in its Special Drawing Rights currency basket, reflecting the entry of China's yuan for the first time on Saturday. The IMF said each SDR, the Fund's unit … More »

  • Colorado gives marijuana candy a new look to avoid confusion
    Colorado gives marijuana candy a new look to avoid confusion Associated Press - 3 hours ago

    Wondering if that brownie contains pot? Colorado has you covered. A requirement that edible marijuana products come with a diamond-shaped stamp and the letters T-H-C — not just on the packaging but on ... … More »

  • Lagarde Urges China to Deepen Reforms as Yuan Joins Elite Group Bloomberg - 4 hours ago

    “The renminbi’s inclusion reflects the progress made in reforming China’s monetary, foreign exchange, and financial systems, and acknowledges the advances made in liberalizing and improving the infrastructure of its financial markets,” Lagarde said … More »

  • Q&A: Will Deutsche Bank become the next Lehman?
    Q&A: Will Deutsche Bank become the next Lehman? Associated Press - 4 hours ago

    Germany's biggest bank is looking shaky and some investors fear it could collapse and endanger the wider financial system. Some even wonder whether it might become the next Lehman Brothers, the U.S. bank ... … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.152-0.008-5.00%
    N21.SI
    0.12+0.01+12.15%
    40F.SI
    0.115+0.003+2.68%
    40E.SI
    0.113+0.007+6.60%
    43E.SI
    3.97-0.05-1.24%
    Z74.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.186+0.025+15.53%
    AWS.SI
    0.12+0.01+12.15%
    40F.SI
    0.164+0.016+10.81%
    40N.SI
    1.35+0.11+8.43%
    U19.SI
    0.475+0.035+7.95%
    NC2.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.36-0.24-40.00%
    AWG.SI
    0.20-0.06-23.08%
    AWI.SI
    0.27-0.03-11.48%
    BQO.SI
    0.30-0.03-9.09%
    5VP.SI
    0.265-0.025-8.62%
    BKA.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3618-0.0022-0.16%
    USDSGD=X
    1.5296-0.0004-0.03%
    EURSGD=X
    1.7640-0.0041-0.23%
    GBPSGD=X
    74.1220+0.051+0.07%
    SGDJPY=X
    5.6879+0.0039+0.07%
    SGDHKD=X
    3.0355+0.0126+0.42%
    SGDMYR=X
    9,608.6318+65.9189+0.69%
    SGDIDR=X
    4.8930+0.006+0.12%
    SGDCNY=X
    1.0424+0.0015+0.14%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,318.80-7.20-0.54%
    GCZ16.CMX
    19.25+0.06+0.30%
    SIZ16.CMX
    94.00-1.01-1.06%
    ^XAU
    2.21+0.02+1.07%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.16+0.04
    ^FVX
    1.61+0.05
    ^TNX
    2.34+0.06
    ^TYX