What To Expect From FOMC Meeting Minutes Tonight

Feb 22 2017, 4:49 pm

USD At Major Resistance

The US Dollar strikes back, rising above 101.50 since the beginning of the week. This is part of the predicted move that we mentioned in our previous reports earlier this week.

As noted before, the US Dollar Index seems to be forming a Head and Shoulders pattern on the daily chart. The left shoulder and the head is already in place, while this week’s rally might be the final part of the puzzle.

The 50 DAY MA stands at 101.44. The Index is currently trading at 101.71, which represents the left shoulder resistance area and should be watched very carefully, as a break above that resistance would eliminate the assumption of such formation.

As long as the Index continues to trade below that resistance, the bearish outlook is here to stay, with a possibility of a leg lower below 100 barrier again.

Fundamental Catalyst

The US Dollar Index needs a significant catalyst in order to complete the Head and Shoulder formation, which might come later today, either from the US data, including the Existing Home Sales, or from the FOMC Meeting Minutes which should be watched very carefully later tonight.

What To Look For In FOMC Meeting Minutes

Traders need to be very cautious and very careful when it comes to the Fed’s statement later tonight. It's not about whether they will raise rates or not. The Fed’s statement is not Black or White. You need to read the statement and look for the following points.

1-Will The Fed Raise In March?

This is one of the main key points for the market. Traders and investors need to know whether the Federal Reserve will go ahead with another rate hike in March, or whether the policy makers would wait for more data to review the upcoming decision.

2-Any Possibility For Unwinding The Balance Sheet?

Since the Federal Reserve stopped the QE program, they are still holding the assets, the process of unwinding the balance sheet haven’t started yet, which would have an enormous impact on the markets.

Unwinding the balance sheet is the real tightening of the Fed’s policy. If so, this is a positive factor for the US Dollar, as the Fed will be selling bonds in exchange for US Dollars.

3-Inflation Expectations

The Fed has been expecting inflation to rise to the 2% for more than 5 years now. However, the inflation is still far away from their threshold. However, progress has been made for the past few months, but it's not enough to grant enough growth.

Cutting inflation expectations for any reason by the Fed would be considered as a disappointment, which would be a signal for fewer rate hikes later this yea.

4-Trump Fiscal Plan

Since the US elections, the Federal Reserve did not mention the new fiscal plan that the new administration has promised to implement.

The plan, in general, should lead to an acceleration in inflation. However, the Federal Reserve’s input is needed, which in return should either increase or decrease the market expectations toward the possibility or rate hikes this year.

5-Any Opposition?

Another important factor to watch is whether the Federal Reserve’s members are on the same page, or if there are some members opposing the latest decisions.

A split in the Federal Reserve council would increase the uncertainty mode in the market, which in return should lead to a massive volatility.

Mind Your Risk

The Federal Reserve announcements are very risky; traders should be aware of their risk levels and their stop loss before going into any trade. There is always tomorrow, don’t rush into a trade you are not confident with.

Nour Eldeen Al-Hammoury

Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.