Let’s take a look at the forex history about this Fed Interest Rate Decision hike. Many traders know that the US interest rate decision has been in a ZIRP (Zero Interest Rate Policy) for 8 Years. We have seen the bottoming of the interest rate decision since July 15th last year. The 10-year Treasury Notes hit 1.35%. It is only the 2nd time this has happened over the previous two decades. Who would have thought that over the next 6 months the 10-year treasury bonds would double the yield from 1.35% to 2.6%! Quite an unprecedented move. It is obvious that the election results on November 9thhad a big impact on this.
WHAT IS A 10-YEAR TREASURY NOTE?
A 10-year Treasury Note is a debt obligation issued by the United States government that matures in 10 years. It pays interest at a fixed rate once every six months and pays the face value to the holder at maturity. An advantage of investing in 10-year Treasury Notes and other fed government securities is that the interest payments are exempt from State and Local Income Tax. However, the income is still taxable at the Fed level.
The U.S. Treasury also sells Notes with two, three, five and seven-year terms. These Notes, along with Treasury Bills and Bonds, can be purchased directly from the U.S. government through the Treasury Direct website via competitive or non-competitive bidding with a minimum purchase of $100 and in $100 increments. These can also be purchased indirectly through a bank or broker. Investors can choose to hold Treasury Notes until maturity or sell early. There is no minimum ownership term.
FED INTEREST RATE DECISION FUNDAMENTALS
This is the first time we will see a non-December interest rate decision hike and Platinum Analysts are of the view that these Fed Interest Rate Decision hikes will continue it reaches 1.50%. This is to not only get ahead of recession but also beat inflation.
Regarding Fed Interest Rate Decision, Platinum analysts suggest that traders should be getting used to the periodic Fed Interest Rate Decision hikes for the rest of the year and a rise in the Dollar in accordance with our Dollar Bull Run Predictions.
Yellen has made a solid affirmation of this Fed Interest Rate Decision hike in her speech two weeks ago. The Wall Street boys are just loving everything that Trump is doing and this is due to a dramatic change in policies and this is something that Yellen did not want to do. Love him or hate him, his strong tax-cutting proposals and massive infrastructure spending proposals are creating jobs and uplifting the economy.
One thing is for sure that Donald Trump has placed a spotlight on the fiscal policies and is doing a good intermediate job in my opinion.
Despite all of the above-mentioned fed interest rate decision fundamentals, why is the Dollar still slipping and is in a state of confusion?
At Platinum, we consistently monitor all aspect of trading and as I always say we are Fundamental Traders first.
A new Sheriff is in town – The TOWN-BORDER TAX ADJUSTMENT.
Click on the video from the Wall Street Journal that will explain the concept in detail.
We need to be on track to see if this policy does get implemented. If this does, believe me, the Dollar is going to the moon! This could bring in an extra Trillion Dollars over a decade to the US Economy.
FED INTEREST RATE DECISION
Now that you are aware of the past and the importance of the
event, let’s move on to how to trade the event i.e. fed interest rate decision.
Fed Interest Rate Decision Event Trading Strategies
MONDAY the 13th of March: RANGE BOUND DAY – Implement Trap Zone Strategy.
TUESDAY the 14th of March: RANGE BOUND DAY – Implement Trap Zone Strategy.
WEDNESDAY the 15th of March: Markets will WHIPSAW – Use the Platinum Fed Interest Rate Decision Trading Strategy.
THURSDAY the 16th of March: Markets will continue the trends. Keep a watch out for the 38.2% Fib Level.
FRIDAY the 17th of March: Cease trading at 15:00 and only aim at buying and selling rallies at the end of the range.
We briefly discussed trading the trap zones along with a few example trade charts in one of our previous blog posts a few weeks ago about this event.
If you would like to discuss the Fed Interest Rate Decision trading strategies for the event and the exact trade plays with a Professional Trader/Mentor, please do not hesitate to book your consultation session.
This is a risk event. We suggest you use no more than 1% of the risk capital overall of your personal trading account.
- Know the ranges of your currency pairs.
- Know the critical times to stop trading.
- Never revenge trade.
- Do not trade after 15:00 on Friday the 17th of March.
- Do not attempt to trade GBP/USD between 16:00 and 17:00.
- If you are new to trading, take out 50% of your balance to protect impulsive behavior and risk.
Scenarios and Currency Pairs
A) The Fed increases the interest rate as anticipated.
Expect an initial spike on Dollar pairs such as CHF, Yen, Cad and Gold to no more than 60 pips and then a reversal. Don’t let this surprise you as this is just profit taking.
B) The Fed does not increase the interest rate by 0.25% but promises an increase in the coming months.
In our opinion, there is only a 5% chance of this happening. If it does, get ready for the Dollar to dive into the abyss. Pairs such as the Euro could end up 200 pips up and Yen around 300 pips down within a matter of hours. You have to be a seasoned trader to trade this as you should be using the 38.2% Bank Stop Loss Hunt Levels as buying and selling levels. The only other strategy that you should be using in the above situation is the Extreme Zone strategy.
C) The Fed increases the interest rate and also promises another hike in the very near future.
This would be the most favorable scenario for all traders. It will break outside ranges and have trend continuation. If this happens, you should be ready to be 100% Bullish. Only look for Long entries for pairs such as Swiss and Yen, Short entries on the Euro and Aussie.
The Aussie Dollar has capped at the 7777 levels just as we had mentioned in our blog post “AUD/USD – Trading the RBA Interest Rate Decision“. If the Indices start to drop, the commodity currencies will tank. An important level to look for for shorting Aussie is sitting at 0.7640.
Do not trade this pair this week. You can get caught up between Brexit, the Fed, and bad fundamental news.
The Euro has turned Bullish. The question is how long? Platinum Analysts are looking at selling rallies on the Euro. The next level of selling should come in around 1.0825. Buying levels of 1.0620 could hold until Wednesday the 15th of March.
The Platinum Formula:
Perfect Fundamentals + Perfect Technical Analysis + Perfect Logic + Perfect Risk Management = Perfect Trade
The Platinum Way
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Hopefully, you have enjoyed today’s article. Thanks for reading! Have a fantastic day!
Live from the Platinum Trading Floor.