What To Look For In FOMC Meeting Minutes

Jul 05 2017, 5:09 pm

In the next few hours, eyes will turn toward the Federal Reserve once again, as we are expecting the FOMC Meeting Minutes. The US market has been closed due to the 4th of July holiday, which led the markets to experience a drop in volatility and liquidity over the past two days.

Yet, volatility is likely to spike higher today ahead of the FOMC Meeting Minutes later tonight. The minutes will be released around 18:00 GMT+.

What To Look For

For the past few months, the FOMC Meeting Minutes effect was somehow muted, with limited impact on USD.

Today’s minutes might be another non-event, especially after last week’s remarks by the central bankers including the Federal Reserve’s chair Janet Yellen.

Central bankers are finally on the same page; they made it clear that the easy monetary policies are coming to an end sooner rather than later.

Such remarks increased the fears around the world, but especially in the bond market. Bonds Yields are rising for the past six trading days, leading global equities to decline including the US.

So in today’s meeting minutes, traders need to look for the Federal Reserve’s plan to unwind its balance sheet, whether the Fed will give us more information about the date of its first sale and/or when the Fed is likely to start selling its assets.

If the Fed decided to hint for unwinding its balance sheet in September, this would lead to a notable impact on the markets.

Otherwise, if the Fed decides to keep things floated, by saying “soon,” then, the market is likely to remain stable until the end of the session.

What Does It Mean For USD

There are multiple scenarios for today’s minutes, and the US Dollar is likely to trade in various directions, especially if the Fed decides to surprise the market with a clear message.

However, the US Dollar has been rising since the beginning of this week, after declining sharply last week and breaking through key support area. Today’s meeting minutes might be a game changer.

If the Federal Reserve makes it clear regarding selling its assets in September, this would be one of the biggest catalysts for another spike higher in USD. However, we believe that such rally is likely to be limited, as the size of the bonds that the Fed is looking to sell is very small compared to its 4.5 Trillion USD of assets.

At the same time, if the Federal Reserve decided to keep things floated, the US Dollar is likely to make a U-turn back to its session lows once again.

Moreover, it will matter the most if the Fed hinted for one more rate hike only this year, especially after the notable slowing down in the recent month. By then, the US Dollar decline is likely to be faster.

Levels To Watch

As noted in our previous reports, the US Dollar index is trading higher since the beginning of the week. This is only a retracement move, which lasted for the past three days.

The index is now trading at 96.30, which is the former support area of last week. Earlier this morning, the index pushed toward 96.45, but failed to stabilize and retreated lower.

In the meantime, today’s close is important, as a break above that resistance area would clear the way for a higher retracement, possible toward 97.0 and/or 97.50, which likely to hold, as it represents its daily trend line resistance.

On the downside view, the first immediate support area stands at last week’s low at 95.50 followed by 95.10.

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.