Whenever the Federal Open Market Committee meets and releases its rate decision and its statement, it’s seen as one of the most important data releases in the markets in the currency markets. And it is, as sometimes there’s a real surprise that can have a huge impact on the markets.
Because of that the whole FX world goes crazy days before it and waits for the statement in anticipation of big moves in the markets. But actually most of the time these don’t happen as there is no big surprise in what the FOMC has to tell. Well yes, the markets almost always go crazy a few minutes before and after the statement is released but that’s more due to the lack of liquidity in the markets. Which is why it’s a good idea for most day traders to stay out of the markets around the release time and also shortly before the release due to a lack of both, liquidity and volatility.
Enough of the talk, let’s look at some stats! How do we get an idea about what happens on FOMC days? We simply get the dates of the all FOMC dates of the last 11 years, have a look at each of these days and compare them to non-FOMC days. That gives us 90 FOMC days we can look at.
Here’s the distribution of how many times the ATR (9 periods) the EUR/USD for example moves (open to close) on FOMC days:
Now we have some outliers here with 22 days of EUR/USD moving more than 1 time the ATR, which is 24% of FOMC days. But on average EUR/USD moved just 0.66 times the ATR on these days.
Compared to non-FOMC days where we have 12% of days moving more than 1 time the ATR and an average of 0.49 times the ATR movements it’s true that at least EUR/USD tends to move more on FOMC days than usual. The same is true for most other currencies related to the USD, but not so much for the crosses.
But this also shows us that most of the time it’s not that crazy. Yes, it’s 30% more action than usual and chances to get a move of more than 1 time the ATR are twice as high as on non-FOMC days. But still that only happened on one out of four FOMC days.
So don’t believe the hype and get too crazy on FOMC days, they’re not THAT different from any other day…unless the FED comes up with the unexpected ;)
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Japanese Yen trades just shy of 157.00 versus the USD
The Japanese Yen weakens across the board after BoJ announced its policy decision. A shortlived spike in the Yen may be testament to an attempt by the Japanese authorities to intervene. US PCE Price Index shows higher-than-expected inflation but does little to impact USD/JPY which almost touches 157.00.
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.
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