Thread: Tomorrow: Fed rate announcement and its effects...

Hello, I am new to the forum and it is a pleasure to be part of this interesting and informative community about forex. I wanted to raise a topic and know the opinion of other traders regarding the reduction of fees (quite obvious

A cut of 25 basis points is already totally discounted. If that�s what they announce, we could see a moderate reaction, perhaps some initial weakness of the dollar, but not much more. The market has been waiting for it for weeks and already has it incorporated in the price. Now, if they cut 50 points, there we can see a strong shock. In that case, the dollar could fall more aggressively, especially against the euro. But we also have to take into account the discourse. If they accompany it with a more restrictive tone, they could neutralize part of the fall.

I think a cut of 25 wouldn't do much. The market is already bored of that. They need to be surprised to move it, and a 0.25 no longer surprises anyone. Now, a cut of 50 would be a very clear message: "we are worried." And that's not good for the dollar or for the economy in general. The interesting thing is to see how the USD/JPY will react, because if the dollar gets too weak, we could see the yen return to its role of refuge. It all depends on how aggressive the tone of the statement is. The number is important, but the words even more.

If they're thinking of cutting 50 is because they're seeing something ugly they don't want to tell us. And that worries me more than the rate itself. It's like when the doctor says "it's nothing, but we're going to do a resonance." The market reacts to that. Not because of the number, but because of the hidden message behind it. If guys feel they need to act urgently, traders are going to run like headless chickens.

For me, the interesting movement is going to be in EUR/USD. If the EDF surprises with 50 points, we could see a direct rally at 1.1100 without scales. But if they maintain 25 and the communiqu� sounds balanced, I doubt the pair will break important resistances. USD/JPY, on the other hand, could be more unpredictable. The yen responds to many things, including global fear. If the Fed is very pessimistic, the yen is triggered. So rather than look at the points, look at the tone and context. There is the key.

I find it nice how everyone thinks they are economists the day before the Fed. The rest of the year they don�t even understand what a real rate is, but today they all analyze basics as if they were working on Wall Street. That said, they�ll most likely go down 25 and the market pretends surprise, do a 15-minute crazy and then return to the same rank. The only ones winning those days are the brokers with spreads. The rest, they lose out of anxiety.

I�m short on the dollar since Friday. Not because I have inside information, but because the price structure asks me to scream. If the Fed goes down 50, I fill up. If it goes down 25, I still have room. The important thing is not if I correct the figure, but if I�m in the right direction of the movement. My plan includes how to react in both scenarios. I don�t care to be right, I care to make money.

Cutting 25 would be a way not to scare the market, but at the same time show that they are doing something. Politically it is easier to defend. There are not very lax or very aggressive left. Now, if they cut 50, that could mean that internally they are seeing signs of weakness that are not yet reflected in official data. And that would be worrying. The dollar would fall and the actions could react in a confusing way.

You know what would be really unexpected? Don�t touch the rate. Let them say �no change, we want to see more data.� There�s war going on. Markets react more to the unexpected than to logic. And the most logical thing now would be a cut of 25. So if nothing happens, the stops are going to blow up. Stay tuned.

In my opinion, a 50-point cut only makes sense if the message is: �Let�s go with everything now so we don�t have to go down after.� It�s a strategy that can calm the market if it communicates well. But if it sounds like despair, forget it. The dollar goes to the floor, the bonuses go off and the gold goes to the moon. It all depends on how they say it. The number just doesn�t reach.