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Mon, Jul 22, 2024

The FOMC are scheduled to hold a meeting later today where they will reveal some key details that will impact the forex markets. The FOMC will reveal their economic forecast and goals for the upcoming years along with their decision on where to place the interest rates. This is one of the most highly awaited decisions of the year. Analysts have been patiently awaiting the result of this decision all week. The U.S. economy is in hot waters due to uncontrollable inflation for the past couple of months. The ongoing European crisis between Ukraine and Russia has definitely made matters worse as well.

In order to curb the ongoing inflation issue in the country, the Feds have decided to make some changes to the interest rates. The upcoming FOMC meeting will reveal key details on the new interest rates. In order to understand how the FOMC meeting is crucial for the future of the forex markets, we need to know what role this committee has and what exactly they’re capable of doing. After all, they seem to be making some key decisions that can impact a billion-dollar industry. Let’s dive deep into the FOMC and how they impact the forex markets.

The Federal Open Market Committee

The Federal Open Market Committee, also popularly known by FOMC, is a subsection of the Federal Reserve System (FRS). This committee is responsible for making important monetary decisions that can impact the U.S. economy. They make these decisions by holding OMOs or Open Market Operations, like the one being held later today. There are 12 members on this committee, including the president of the Federal Reserve Bank. They hold scheduled meetings about 8 times a year. They can even hold emergency meetings outside of these scheduled ones if deemed necessary to do so. These meetings are crucial as they decide important decisions regarding the economic and monetary future of the country.

FOMC minutes meeting Jerome Powell said it is time to scale back stimulus from the economy

About four times a year or on a quarterly basis, the Chairman also discusses the economic predictions submitted by members of the FOMC. This meeting is held after the FOMC meeting each quarter. After an FOMC meeting is held, you can access full minutes after three weeks and complete transcripts after 5 years. It is important to note that while these meetings discuss economic details in general, their main long-term goals are always to maximize employment and stabilize prices. In order to achieve these objectives, they usually make short-term changes to interest rates like what they’re going to be doing in the meeting held later today.

The FOMC Meeting Predictions

In anticipation of the FOMC meeting, we’ve already experienced extreme volatility in the forex markets. The U.S. Treasury Yields reached its two-year high in anticipation of the results due to which other markets were impacted as well. XAUUSD even dropped from the high 2000s to the low 1910s within a couple of days as a result of this decision. The U.S. has been going through a severe inflation crisis for quite some time now. This crisis comes initially as a result of the COVID-19 pandemic. Businesses in several industries were severely impacted as a result of this pandemic. But this isn’t the only factor contributing to the high inflation problem. The recent European troubles are much to blame as well. The war between Russia and Ukraine has caused inflation to skyrocket and prices have become uncontrollable. In order to combat this problem, the FOMC will reveal the new interest rates for the country.

Central banks exercise power over inflation and exchange rates by regulating interest rates and changes in interest rates affect inflation and currency prices 1

The Feds have already given hints towards an increase of 0.25% in the interest rates for the country. However, nothing is for certain until we find out what has been decided at the FOMC meeting on Wednesday. Due to the issues causing inflation we just mentioned above, it is likely that there’s a slight chance we may witness a much higher increase in interest rates. Analysts have been forecasting their predictions for the new rates this week. They revealed that an increase of 0.50% is much more likely given the current economic conditions around the world. If we witness a higher increase than what’s expected, we will witness the dollar in a bullish market. However, if the increase is lower than expected, it is likely the dollar will find itself in more bearish market conditions.

Market Specialists On Meeting Predictions

Simon Mocuta, Chief Economist at State Street Global Advisors, came out in a statement to reveal her thoughts on the interest rate predictions which are to be revealed later today. According to Mocuta, “The 0.25% is a given. What matters most is what comes after. A lot can happen between now and the end of the year. The uncertainty is super high. The trade-offs have worsened considerably.” We can understand through Mocuta that it is likely that the interest rates are going to be at least 0.25% or higher. Therefore a bearish dollar market is almost unlikely to occur in her opinion.

Stephanie Aaronson, Director of Economic Studies program at Brookings Institution, revealed her thoughts on the economic conditions around the world and how they will impact the decisions of the upcoming FOMC meeting. Aaronson revealed, “It’s really been a series of negative shocks, that are completely outside of their control, that have complicated their job.” Aaronson is discussing the current war crisis between Ukraine and Russia. She reveals how the States had already been struggling with inflation but this new crisis has definitely made matters a lot worse. The Feds have a big decision on their plates.

Impact On EURUSD

EURUSD is one of the hottest pairs in the market these days due to the ongoing European crisis which is impacting the entire world. This pair is always surprising us with a new outlook on life each week. This week, we’ve witnessed rather mainly bullish market conditions with the popular pair. On one end, it’s being tugged towards support levels due to the ongoing war between Russia and Ukraine. On the other hand, it’s being pulled towards resistance in anticipation of the upcoming FOMC meeting which will reveal key details on the interest rates among other economic policy changes.

EURUSD at the higher low area of the symmetrical triangle pattern in the higher timeframe monthly chart.

EURUSD at the higher low area of the symmetrical triangle pattern

EURUSD moving in a downtrend line in the daily chart

EURUSD moving in a downtrend line

EURUSD is moving between the channel ranges in the 30 minutes timeframe

EURUSD is moving between the channel ranges

EURUSD moving in an Ascending channel range in the hourly chart

EURUSD moving in an Ascending channel range

Currently, EURUSD is testing resistance levels by teasing around the 1.10000 mark. The recent meeting between Ukraine and Russia is partly to be blamed for these levels. The meeting was supposed to resolve issues but they weren’t able to reach an agreement. The upcoming FOMC meeting is expected to cause the dollar market to become bullish. If these predictions prove to be true, we may be looking towards a bullish pattern for this pair as well. It is recommended to hold until results of the FOMC meeting are revealed before placing any positions for this pair.

Impact On GBPUSD

GBPUSD had been following a bullish momentum as of a few days ago but soon lost traction due to a couple of factors including new updates to the European crisis as well as in anticipation of the upcoming FOMC meeting results which will reveal key details regarding the new interest rates policies. As of right now, we’re witnessing this pair struggling to stay above support levels as it tests the 1.30 region. A bearish pattern is likely to ensure due to the recent economic conditions. Analysts don’t have high hopes for this pair since they forecast interest rates to rise higher than anticipated. The Feds revealed their plans of increasing the rates by 0.25% but due to the ongoing economic conditions, this may not be enough and it’ll have to be raised by at least 0.50% to control the inflation problem.GBPUSD is moving in a downtrend – market standing at the low level now

GBPUSD is moving in a downtrend line

GBPUSD moving in an ascending channel in the 30 minutes chart

GBPUSD moving in an ascending channel in the 30 minutes chart

If predictions prove to be true, GBPUSD may be looking at continuing in bearish market conditions for quite some time. Since there is hope for the Russia and Ukraine tensions to dissolve in a couple of months, this may be the only hope for this country to revive back its numbers. However, until the results of the meeting are revealed later on Wednesday, it is recommended to hold off before placing any new positions with this currency pair.

Impact On USDJPY

USDJPY has probably had one of the greatest price hikes as a result of the current economic conditions. This currency pair had seen a gain of over 350 pips since the beginning of the week. This massive jump has been record-breaking for USDJPY as it has caused it to cross its five-year high. It is currently testing the waters around the 118 mark. We haven’t seen these numbers in USDJPY since early 2017. Although these numbers are record-breaking, they come as no surprise considering the updates surrounding the dollar in recent days.

USDJPY hits the major resistance level and the higher high area of the channel in the weekly timeframe chart.

USDJPY hits the major resistance level and the higher high area of the channel

The recent hike in the U.S. Treasury yields which had caused it to reach its two-year high can be credited towards the beginning of the upward trend for this pair. This comes in anticipation of the FOMC meeting which is to be held on Wednesday. It is expected that the interest rates will be higher than what’s been predicted. If this proves to be true, USDJPY will most likely continue their current trend upwards with no limit to which heights they may reach. As for the impact by the Russia-Ukraine crisis, USDJPY seems mostly unfazed. Traders are recommended to watch the markets closely for any change as a result of the meeting being held later today.

Impact On XAUUSD

XAUUSD is just one of those pairs that received the short end of the stick as a result of the current economic conditions. We have witnessed this pair go from heights in the 2000s to lows in the 1910s as of last night. As of right now, XAUUSD is struggling to stay steady in the 1920s. It is extremely volatile these days and should be traded with extreme caution. If we compare the volatility shown by this valuable asset in the last couple of days, the fluctuations it is revealing today are actually quite stable. However, we shouldn’t relax ourselves just yet as later today we’re still to hear the results of the FOMC meeting.

Gold price is standing at 1910 zone

Gold price is standing at 1910 zone

The U.S. Treasury yields reaching their two-year high in anticipation of the FOMC decision on interest rates has already caused XAUUSD to fall below every support level the last couple of days. Traders are not optimistic about the future of this valuable asset as it is expected that the interest rates will rise higher than predicted to combat the ever-growing inflation problem. This would cause XAUUSD to fall below support levels once again. The only hope for this pair to get itself above hot waters is the crisis between Russia and Ukraine. If matters between the two countries don’t improve any time soon, XAUUSD may still be able to stay above support levels.

Upcoming Important Events

Aside from the upcoming FOMC meeting being held later today, there are a couple of other events coming up very soon that need to be kept an eye on as well. The U.S. Core Retail Sales data is also going to be revealed later today. This data measures consumer spending excluding automobiles. The EIA will also reveal results later today regarding changes to the inventory levels of crude oil. There is a great shortage of energy resources around the world so this data is extremely crucial. It greatly impacts inflation in the country as well as most people are unable to afford to pay for petrol anymore these days.

Tomorrow, we will receive results regarding the change in the number of building permits issued in the U.S. This number is key to reveal if the housing market is in high demand. We will also receive results regarding the number of people who filed for unemployment insurance in the country. This result is updated weekly and will come out on Thursday. There is always something impacting the forex markets. Therefore, we recommend always staying up to date with us to never miss out on any key information that might help you make better decisions regarding executing any positions in the market.

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