Entering 2023 there has been prevalent market fears of an impending recession for first world countries such as the United State. From the last half of 2022 till this year Inflation levels of the dollar had reached record highs which has had many worried that a recession is looming ahead. To fight inflation the fed has had to release record high interest hikes and one may argue that these may have been effective and justified as in the last inflation report of January 2023 the inflation rate has been shown to be dropping. These conditions may trigger the FED to either increase interest rates or lower them, either way FOMC meeting minutes to be announced tomorrow is bound to casue market volatility today so it is best to trade with caution.
Major economic events and announcements cause a lot of market volatility. This can be used to your advantage as you can gain a lot of pips in a short amount of time, however, brokers can make this very hard by placing very high spreads and slowing down transaction speeds. To enjoy your trading experience you need to find a broker with small fixed spreads with fast transaction speeds. To find such brokers I recommend you use WikiFx. This app is connected to all the broker regulatory boards globally so they can help you quickly compare brokers and find the best broker with your prefered trading conditions. Trust me, WikiFX will save you a lot of money in the long run so use this app for any broker inquiry you may have.
As the US seems to be entering positive economic territory the FOMC meeting minutes is sure to carry a lot of weight as they will shed light into the future decisions of the FED. The high inflation levels caused the FED to take drastic measures and hike interest rates to unprecedented levels. The increased expense on credit is meant to discourage borrowing to decrease money supply. The catch-22 to that method is that economic activity is discouraged as there are less business owners and enterprenuers who are applying for loans hence prolonged interest rates hikes is not ideal.
This means that in light of the new economic conditions the FOMC meeting minutes will aid investors to determine the rationale behind the decisions of the FED and the lightly direction of their decisions going forward. Many investors will be interested to find out information regarding further plans to increase or decrease interest rate as it will determine their investment potential in the future. With all of this sediment caught up in the market there surely will be volatility as there will be lots of liquidity of both sides.
What should we do as traders？
Make sure to have scanned and marked out important support and resistance zones on your chats on currency pairs that feature the USD before the minute announcements. Be sure to set a timer for 2pm New York time as that will be when the information will be released. Be sure to follow strict risk management, the market will be moving quickly so big lots can stop you out prematurely. If the FOMC minutes reveal a desire for high or higher interest hikes then we can expect the dollar to to take a temporary dive as it signals reduced economic activity and strenghens the case for an incoming recession, If the FED shows interest to reduce interest rates then we can assume that the opposite will happen.
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