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Virtually any trader knows that often occur abnormal movement of quotations in the market are very strong trends. At such moments, you can earn well, can only understand when to expect such cases. One of the most important factors affecting such movements in the foreign exchange market - a decision on interest rates Fed.

I have long understood how you can get a profit on the day of release of the data rate. Let us consider that it represents the event and how you can earn on it.

Fed Interest Rate

The US Federal Reserve (Fed) - A federal agency in the United States, which exercises control over the banking system, in particular, shall take a decision on the interest rate in the country. If we draw an analogy with Russia, it is the US central bank. The Fed is composed of 12 banks located in major US cities, as well as other national and state banks.

The interest rate is the interest rate that the central bank to pay the other commercial banks (credit institutions). The latter in turn make loans to the population. The rate allows the state to manage the economy of the country, and extremely interested investors.

All the Fed's decisions are carried out in the form of Board of Governors of 7 people who are appointed by the president and confirmed by the Senate.

Fed Chairman at the moment is Janet Yellen. The term of its powers to 2024 years, which is as much as 10 years 2014 years. For reference, it is fairly well-known and influential figure in economic circles, so her public appearances are also putting pressure on the currency rates.

The reasons for which the interest rate has an impact on the market:

• Attractiveness of investing money at high interest rates to investors. You agree that everyone wants to invest with maximum profit. Therefore, the reason the rate is so important, is that it increases the percentage of increase of depositors in banks, and the number of investors and the influx of investment and strengthening the country's currency.

• The dynamics of interest rates reflects the economic situation in the country. Along with an increase of depositors in the previous case, reduced the number of those who take loans, because no one wants to borrow money at high interest rates. State raises rates to control inflation (devaluation of money and the price increase) and decreases in order to avoid a recession (the lack of economic growth). a stronger currency in a strong and developed economy.

The term of the Fed meeting in deciding on the rate - 2 days. Total for the year 8 held such meetings. The influence on the market is not only in the date of the meeting, but also after, when protocols (usually via 3 weeks) are published. Especially for your convenience, I recommend to get acquainted with the schedule of meetings and the publication of reports on 2017 year.

meeting Date Protocol Date
January 31 - 1 February February 22
March 14 - 15 March 5 April
May 2 - 3 May 24 May
June 13 - 14 June July 5
July 25 - 26 July 15 August
September 19 - 20 September 11 October
October 31 - 1 November 22 November
December 12 - 13 December 3 January

Keep track of time for your time zone meetings, you can use the economic calendar. For example, I expect in the near future a meeting to be held on March 15 21: 00 Moscow time.


Most analysts forecast a rate increase. Personally, I am also inclined to this, since the last meeting Janet Yellen directly declared its intention to raise rates throughout the year. But it is going to be made immediately to 0,5%, and in times 2 0,25%.

In summary:

• The decision on the interest rate taken the Fed, led by Janet Yellen, which controls the entire US banking system.

• The rate strongly influences the market because it attracts new investors to the country, and reflects the dynamics of US economic growth.

• Total 8 meetings per year, to watch them, you can use the economic calendar.

Raising Fed

Let's move on to the practical part of our discussion. As a result of the Fed meeting could be three solutions at a rate of: increase, decrease, or leave it unchanged. Each option in their own way affects the quotations of currencies. Let us consider each case on the charts.
The previous interest rate decision on February 1 2017, the value left unchanged - 0,75%. As an example, take the popular currency pair EURUSD, as well as pay attention to the US dollar index DXY. At the moment when the result was known, it was following the situation on the index chart.


As you can see, the dollar began to weaken against other world currencies. A novice trader does not immediately understand what was happening, because the rate remained unchanged. It's all about expectations before Janet Yellen promised to increase, but in the end there was nothing, and everything began to sell US dollars, which was purchased earlier.

At this point, it was great to buy options on the increase for EURUSD. The graph in this case a little correlated with the index.


It should be noted that it is necessary to take the time and start buying immediately after the release of data, because the volatility of the market at this time exceeds the limit. It is much easier to wait a little (from 15-30 minutes to several hours), until everything calms down and formed trend movement.

Trend effect after the rate usually lasts throughout the trading day and sometimes longer. Overall, the data indicate the general mood in the month ahead. If you are working, for example, with options for the week, you can easily determine the direction of the market for this indicator.

And now look at the market reaction after the publication of the minutes of the meeting of the Fed. Again sell EURUSD at M15.


As can be noted, the minutes are not less important than the day when the decision was made.

Option StrategiesWhich can be applied at the time of the decision on the interest rate the Fed:

• scalping;
• position (trend) method;
• medium-term investments.

Let us consider each of them in detail:

Scalping should be applied in the first 30 minutes after the release of the data rate, because at this moment the market a strong movement and high volatility. However, such a strategy is suitable More experienced traders as require fast response and experience in determining the mood of the market. Timeframe - M1, the recommended time of expiration - 1 minutes.

Advantages: fast and high income at the time of the release of data.

Disadvantages: the ability to effectively trade only within 30 minutes after the event, the need to be constantly at the monitor, the complexity in the application.

Positional Trading You can apply through 1-2 hours after the results of the meeting, when the market will be more calm. This method is recommended for beginners because it is easy to apply. Just look at the eyes which goes the trend after the news and make trades. Timeframe - M5, M15. Expiry Time - by up to 15 60 minutes.

Advantages: the ability to realize the full potential of the news in terms of profitability during the trading day, easy to use.

Disadvantages: are practically absent.

Medium-term investment it is also desirable to use through 1-2 hours after the news to understand the mood of the market. Timeframe - H1. Expiry Time - 1 week.

Advantages: ease of application.

Disadvantages: low profitability compared with the previous two methods.

To sum up a little:

• Fed meeting could take three solutions: increase, decrease, unchanged.

• Impact on the currency quotes depends not only on the rate of increase or not, but also from the fact that most market participants expect.

• In addition to schedule a particular currency pair, it is desirable to observe the schedule of the US dollar index DXY, which is calculated based on a basket of six major world currencies.

• Earn on the Fed decision as you can with the help of scalping and positional and medium trade.

• Experienced traders will approach combining scalping and position trading, and newcomers -way and medium-term strategy.

Trading strategy on interest rates Fed

Next, I want to introduce you to practical methods and strategies, how to trade on this news. For practical advice and screenshots, I want to thank my friend, colleague, a very good and experienced trader - Paw? A. We prepared this training article together! So we begin.

In building a specific trade investment plan for this event, we have to analyze previous similar news. The only way we can understand how to trade in anticipation of the data and when to enter into transactions for some assets after the publication of the interest rate. Analyze the necessary reaction of currency pairs that include USD, as well as gold. It is known that the strengthening of the US dollar reduces the value of gold, and vice versa, if the value of the dollar falls - the price of gold increases. 

Lets you look at 2 scenario with which we can deal. This increase in the interest rate and the interest rate unchanged when its level remains the same. Theoretically, there is a third scenario - a reduction in the Fed rate, but such a course of events almost 100% is unlikely. 

15.03.2017 - we'll look forward to improving performance with 0,75% to 1,0%. This is confirmed by data from previous months, forecasts and expectations of analysts and financiers from around the world, as well as statements by Fed members themselves. 

1. positive results. Fed raises interest rates.

December 14 2016 Fed has promised to raise interest rates, and it really happened. Let's see the results on the screenshot below, which shows an increase from the level of 0,50% to 0,75%:

fed positive desicion

A few days before the start of the Fed meeting was published announcement of an increase in interest rates. Sentiment in financial markets have improved significantly after that. The dollar began to strengthen already before the publication of news. In 19: 00 GMT (20: 00 MSK) has been declared the result. The Fed raised rates on 0,25%. 

Screenshots below show you how to change the assets of the course during the day before the publication of the data and where else 12 hours the next day. Date of publication marked by the arrow.

You can clearly see that the news is very strong and the market reacts dynamically to it. The first 12-15 minutes is just insanity with sharp brackets. The dollar strengthened by 50% of daily volatility in just a few minutes. Then followed a minor correction during 20-30 minutes. And then again the growth of the value of the dollar until the end of the day. For some pairs, we can observe the strengthening of the dollar in a few weeks. This is an excellent opportunity to earn, trading on the trending. But remember that this event affects the subsequent economic news and currency pairs where USD is present. They may not work well ...

usd chf reaction up

usd jpy reaction up

usd eur reaction up

usd aud reaction up

gold reaction up

The last screenshot shows the rapid fall in the value of gold at strengthening USD.

Now the most important thing: how to open the transaction, trading on such a significant event:

1) Prior to the publication of data

If the forecast is optimistic (ie, indicates an increase in interest rates), we can open the speculative options on USD strength with time to expiration 1,5 hours before the event. This should apply to all available currency pairs with the US dollar and, of course, for the gold. So, open:


And with the dollar in the second place:

EUR / USD Down
AUD / USD Down
Gold (GOLD) down.

At the same time mindful of compliance with the rules of money-management, not more than 2-3% for each position.

2) Moment of the publication of data

In the first seconds after the news, we would not recommend to open options. It's risky. Platforms brokers often do not immediately react, can open the option to delay and to offer you a completely unprofitable entry point, since the cost can jump very high in just a second. Catch a very high point, you can lose your investment in the short-term options, as the course is then adjusted to jump down and so on. 

3) After the publication of data

When the% rate, over 12-14 minutes after the publication of data, you can open the options for the strengthening of the USD and the fall in prices GOLD GOLD, expiry time - until the end of the day. 

2. neutral results. The Fed does not raise interest rates.

There are two possible scenarios for the development of events and their direction depends on the forecasts of analysts. We will consider a situation when analysts expect a rate increase, but the expectation is not met and the rate is left at the same level. This was the situation on February 1.02.2017, XNUMX. Investor sentiment was positive, everyone expected the Fed to raise interest rates, but this did not happen. The level remains the same.

Screenshots below show you the market's reaction to this situation. After the publication of USD began to weaken, as expectations were not fulfilled. In the first minute of the course it is very hopping, it is connected with speculative trade entry by the Market Makers (banks, large trading platform, financial institutions, and so on. D.) But somewhere in 14 minutes, the exchange rate stabilized and began to steady downward movement, that is, the weakening USD.

usd cad reaction neutral

usd jpy reaction neutral

usd eur reaction neutral

usd gbp reaction neutral

What to do if the results were neutral, + if you do not expect an increase?

1) Prior to the publication of data

It is better not to open speculation, there is no clear trend, it is better not to risk it.

2) Moment of the publication of data

You can open short options 2-5 minutes. Choose better 1 or 2 asset to no longer run out of time, since options need to open in the first seconds after the publication in order to enter into a deal at a good price.

USD / JPY Down
USD / CHF Down
USD / CAD Down

And with the dollar in the second place:

Gold (GOLD) Up

Again, do not forget about the proper management of your deposit!

3) After the publication of data

Here it is necessary to act in a similar way as described above. Through 12-14 minutes after the publication of data, you can open the options for the weakening of USD to the end of the day. 

We shared with you our methodology and trading strategy for news decision on interest rates Fed. We hope that for you it will be useful, will get a good profit! 

Any additional questions or write their observations in the comments! 

Yours faithfully,

Anna and Paweł

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