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May 25, 2022

How To Trade FOMC Today

Frank Cabibi

The FOMC meeting is scheduled for 2:00 pm EST today as the USD is stronger on the day. The stock market remains uncertain as volatility picks up hours before the meeting. We are going to hear sentiment towards monetary policy and thoughts on rate hikes going forward after the latest 50 bp hike.

What To Listen For

It is important to listen to what they discuss regarding interest rates and what it would take for them to loosen their grip on such tight policy. If the Fed mentions a concern for the slowing of the economy, then they might take measures to let up on the aggressive hikes.

Additionally, the Fed's aggressive 50 bp hike on May 4 might have been enough for them to decide on a less aggressive stance. A problem we are facing now is the economy and jobs data. The US has missed several weeks of expectations in unemployment claims. Claims have climbed up to 218,000 from 184K a month ago.

Listening to economic projections is going to be another important thing to do. Judging by the past several weeks, projections may be weak in the short term. At least, this is what I'm expecting them to say. A major concern lies within a possible recession due to a slowing jobs market and higher costs causing less spending. Regardless, there might not be

USD Setups During FOMC

USD/JPY

FOMC

USDJPY came down to the 50 DMA for potential support and is beginning a bounce as investors eye the upcoming FOMC news. Support lies right below around 125.025. If policy continues its aggressive stance towards interest rates, we may find more upside for the pair.

USD/CAD

FOMC

USDCAD is coming off resistance from a falling trend line on the 1D timeframe. Overall trend is still upward, but looks like price is rejecting off today's highs. Increased volatility today could make technicals irrelevant for a little while. Additional support could be below around the 50 and 200 DMA.

GBP/USD

FOMC

GU looks increasingly bullish as today's candle pushes higher today. We might see some higher highs on the day, but it is still likely that the USD will regain strength after the FOMC statements. A tighter policy seems more likely now, so more downside looks to be what's in store for this pair.

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