April FOMC Preview – 3 Scenarios for the Fed and Impact on Dollar

Fed rate hike Federal Reserve FOMC forex blog Kathy Lien US Economy

In 24 hours the Federal Reserve will announce its monetary policy decision and everyone expects interest rates will remain unchanged.  The Fed has done a great job of preparing the market for steady rates but no changes to monetary policy doesn’t mean  no volatility for the U.S. dollar.

The reason why the April FOMC meeting is important is because it will help to shape expectations for June.  There’s no monetary policy in May so if the Fed wanted to prepare the market for possible tightening, they would need to tweak this month’s FOMC statement. The problem is that the odds of a dollar positive and negative outcome is roughly balanced.  With the global markets stabilizing and commodity prices moving higher, the Fed has less to worry about internationally but domestically, growth has slowed. So even though no changes in monetary policy is expected at this month’s meeting, the greenback could still have a meaningful reaction to FOMC based upon the Fed’s assessment of the economy.

Now lets run through the possible scenarios:

Scenario 1 -- The FOMC statement remains virtually unchanged = Mildly negative for the dollar because it would imply an ongoing split within the Fed and reluctance to raise interest rates.

Scenario 2 -- Fed acknowledges deterioration in data and leaves out risk assessment = Dollar Bearish
The balance of risks statement was removed from the last 2 monetary policy statements because policymakers could not agree on the outlook for the economy. So if the risk statement is absent again, the dollar could spiral lower as the market interprets it to mean no rate hike in June.

Scenario 3 -- Fed acknowledges deterioration in data but describes it as transitory AND the risk statement returns = Dollar Bullish
If the risk statement reappears and the Fed describes the risks are balanced, the dollar will soar as the chance of a June hike increases significantly. Aside from the risk statement the central bank’s comments about recent data disappointments will also be important. If they say the deterioration is transitory, it will help the dollar.

The following table shows how the U.S. economy performed between March and April. An initial glance shows more deterioration than improvements with consumer spending, labor market activity, inflation, production and trade weakening. However there are glimmers of hope. The rally in U.S. stocks helped to boost consumer confidence as measured by the Conference Board’s report, consumer prices are still moving upwards as gas prices increased. New and pending home sales rebounded and most importantly manufacturing and service sector activity accelerated. With average hourly earnings on the rise, the Fed could argue that the economy will regain momentum in the near future and with prices rising, they need to get ahead of inflation expectations. In other words while the data suggests that the Fed should be less hawkish, they could also find reasons to stick to their plan of raising rates twice this year.

FOMC_0416

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Date Currency
Event
GMT Strategy
May 29 -Th USD/JPY US GDP 12:30  C-Trader
May 29 -Th EUR/JPY US GDP 12:30 C-Fighter

 

  

Last 24 hours Results
Crowd Fighter 
GBP/USD -17
 

C-Trade
GBPUSD +10
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 29, 2015) -- Good Luck Trading!

1. US GDP  (8:30AM NY Time) USD  -- GDP Data is hard to call but will be market moving

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No Trades

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy
May 28 -Th GBP/USD UK GDP 8:30  C-Trader
May 28 -Th GBP/USD UK GDP 8:30 C-Fighter

 

  

Last 24 hours Results
Crowd Fighter 
No Trades
 

C-Trade
No Trades
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 28, 2015) -- Good Luck Trading!

1. Eurozone Confidence  (5AM NY Time) Bearish EUR  -- Should be bearish given decline in ZEW

2. Canadian Current Account  (8:30AM NY Time) Bearish EUR -- Potential for downside surprise given major deterioration in trade

3. US Pending Home Sales  (10AM NY Time) Bullish USD -- Potential upside surprise given jump in new home sales

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No Trades

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
No Trades
 

C-Trade
No Trades
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 26, 2015) -- Good Luck Trading!

1. NZ Trade Balance (6:45PM NY Time) No Trade — Potential downside surprise given drop in manufacturing PMI index

2. US Durable Goods and S&P CaseShiller House Prices (8:30AM NY Time) No Trade — Durable goods and house prices are difficult to predict but can be market moving

3. New Home Sales & Consumer Confidence (10AM NY Time) Bearish USD — Potential downside surprise given steep decline in Existing home sales. Confidence should also be weaker because even though there was a rise in IBD, the University of Michigan index fell sharply

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No Trades

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
No Trades
 

C-Trade
No Trades
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 15, 2015) -- Good Luck Trading!

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AUDUSD +10

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
No Trades
 

 
C-Trade
GBP/USD +10
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 14, 2015) -- Good Luck Trading!

1. NZ Business PMI and Retail Sales (6:30PM NY Time) Bearish NZD — Potential downside surprise given sharp drop in employment

2. US PPI and Jobless Claims (8:30AM NY Time) Bearish USD — Potential downside surprise given drop in import prices

Day Trading Signals May 12

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No Trades

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
No Trades
 

 
C-Trade
No Trades
 

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 12, 2015) -- Good Luck Trading!

1. UK Industrial Production (4:30AM NY Time) Bearish GBP ---- Potential downside surprise given drop in manufacturing PMI index and dip in new orders. 

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EURUSD +10

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy
May 7 -- Th AUD/USD AU Employment 1:30 C-Trade
May 7 -- Th AUD/USD AU Employment 1:30 Fighter

 

  

Last 24 hours Results
Crowd Fighter 
GBPUSD +12
 

 
C-Trade
GBP/USD +10

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 6, 2015) -- Good Luck Trading!

1. Australian Unemployment Report (9:30PM ET) Bullish AUD — Potential upside surprise given rise in employment component of manufacturing and services ISM

2. Chinese Trade Balance (TBD) No Trade — Will be very market moving but Chinese data is difficult to predict 

Day Trading Signals May 6 – Daily Tally No Trades

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BK Day Trading Chat Room Results  5/05

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No Trades

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy
May 6 -- We GBP/USD UK PMI Services 8:30 C-Trade
May 6 -- We GBP/USD UK PMI Services 8:30 Fighter

 

  

Last 24 hours Results
Crowd Fighter 
No Trade
 

 
C-Trade
No Trade

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 6, 2015) -- Good Luck Trading!

1. New Zealand Unemployment Report (6:45PM ET) Bearish NZD — Potential downside surprise given deterioration in NZ Manpower jobs index and dovishness of RBNZ

2. Australian Retail Sales (9:30PM ET) Bullish AUD — Potential upside surprise given rise in sales component of March PMI services report

3. Chinese PMI Services (9:45PM ET) No Trade — Chinese data is notoriously difficult to predict but can be very market moving.

4. Eurozone PMI Services (4AM ET) No Trade — Revisions are likely but hard to predict

5. UK PMI Services (4:30AM ET) Bearish GBP — Potential downside surprise given no change in Gfk and drop in PMI manufacturing

6. EZ Retail Sales (5AM ET) Bearish EUR — Potential downside surprise given drop in German retail sales

7. US ADP (8:15AM ET) No Trade — ADP will be important but difficult to predict

8. CAD IVEY PMI (10AM ET) Bullish CAD — Potential upside surprise given optimism of Bank of Canada 

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EUR/USD +15 

   

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy
May 5 -- Tue AUDUSD RBA 4:30 C-Trade
May 5 -Tue AUD/USD RBA 4:30 C-Frighter

 

  

Last 24 hours Results
Crowd Fighter 
No Trade
 

 
C-Trade
No Trade

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 5, 2015) -- Good Luck Trading!

1. Australian PMI Services (7:30PM ET) Bullish AUD — Potential upside surprise given rise in PMI manufacturing

2. RBA Rate Decision (12:30M ET) No Trade — Rate decisions are difficult to predict. Will be a volatile one

3. EZ PPI (5AM ET) No Trade — No change in German PPI

4. Canadian Trade Balance (8:30AM ET) Bearish CAD — Potential downside surprise given drop in IVEY PMI in March

5. US Trade Balance (8:30AM ET) No Trade — Hard to predict because no change in ISM manufacturing

6. US ISM Non-Manufacturing (10AM ET) No Trade — Hard to predict because no change in ISM manufacturing 

Day Trading Signals May 1 – Daily Tally +75 pips

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BK NEWS TRADES with our Economic Data Projections   

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How To Trade AJAX

How To Trade Crowd Fighter

How To Trade C -- Trade 

BK Day Trading Chat Room Results  4/30

BK Trading Room Results

EUR/USD +15

EUR/JPY+15 

AUD/CAD +15

AUD/USD +10

NZD/JPY +10

AUD/JPY +10

   

Want to join our chat room (its included in your subscription)?

Just Email [email protected] with subject line “Slack”

   

****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
No Trade
 

 
C-Trade
No Trade

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (May 1, 2015) -- Good Luck Trading!

1. Chinese PMI Manufacturing (9PM ET) No Trade — Chinese data is difficult to predict

2. AU Producer Prices (9:30PM ET) Bullish AUD — Potential upside surprise given rise in Australian consumer prices

3. UK PMI Manufacturing (4:30AM ET) Bullish GBP — Potential upside surprise given small increase in CBI Total Trends index and rise in house prices

4. US ISM Manufacturing Index (10AM ET) Bullish USD — Potential upside surprise given rise in Chicago PMI and Philly Fed index 

Day Trading Signals April 30 – Daily Tally +25 pips

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BK NEWS TRADES with our Economic Data Projections   

 

Videos on How to Trade our 3 BK News Strategies 

How To Trade AJAX

How To Trade Crowd Fighter

How To Trade C -- Trade 

BK Day Trading Chat Room Results  4/23

BK Trading Room Results

NZD/CAD +10

 EUR/JPY+15 

   

Want to join our chat room (its included in your subscription)?

Just Email [email protected] with subject line “Slack”

   

****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

Date Currency
Event
GMT Strategy

 

  

Last 24 hours Results
Crowd Fighter 
EURJPY -17
 

 
C-Trade
USD/JPY -15

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (April 30, 2015) -- Good Luck Trading!

1. BoJ Rate Decision (12AM ET) No Trade — No changes are expected and we do not trade rate decisions

2. German Retail Sales & Unemployment (2AM & 3:55AM ET) No Trade — Difficult to predict given marginal rise in confidence and little change in rate of job creation

3. CAD GDP (8:30AM ET) Bullish CAD — Potential upside surprise given increase in retail sales and trade balance

4. US Personal Income and Spending (8AM ET) Bullish USD — Potential upside surprise given rise in average hourly earnings and retail sales

5. US Chicago PMI (9:45AM ET) No Trade — Difficult to predict because rise in Philly offset by drop in Empire State manufacturing surveys