The FOMC sets the discount rate or federal funds rate and because interest rates are set higher to induce foreign investment and therefore fight inflation during times of prosperity and lower to increase spending during recessions they are one of the main factors influencing the strength of the dollar. Economic indicators play a huge role in the forex trading especially for traders who approach the market through fundamental analysis and fomc news forex the news. I have heard many ‘traders’ say never to trade the news and especially the FOMC.
Although the FOMC interest decision is a news event and can fall under the category of through fundamental analysis I am a technician and I believe that charts always price everything in. However I guarantee the market does not know what exactly the Feds comments and decision will be, therefore it is not priced in yet and this will cause the markets to react when they do find out. I have been trading the Fed for eight years now and yes I have been burnt in the past and that is exactly how I have come to learn how to trade it properly. The most common pattern to trade the Fed is the whip-saw. But do not be fearful of it, embrace it. If this pattern does not play out exactly as outlined I stand on the sidelines and do not trade at all.
Because the markets are moving fast in the period following the FOMC interest rate decision I am watching a very short time frame, mainly the one and five minute charts. How To Win at Forex Trading! Daily Forex Market News – Do You Really Need Daily News? Forex News – Why Most Traders Use It In The Wrong Way and Lose!