USD Rally Ahead Of Big Events NFP & FOMC

Although the data was limited in the U.S. session today, the USD rally continues for now as the markets anticipate a Fed rate hike on March 15th. The market first looks forward to Non-Farm Payrolls on Friday at 8:30am GMT time, the next big set of data prior to FOMC meeting next week. If the data is as expected or higher, then this could be a deal maker for the FOMC.

What If Rates Increase….And the USD Rally Slows Down?

Doesn’t this go opposite of what we’ve been taught; a rate increase is a hawkish signal which means a stronger U.S. Dollar. While that is true, remember one of the most important Forex trading behaviors; “buy the rumor, sell the news.” If that is true then the reason we see the Greenback rising this March is because the probability of a rate hike is rising every day, and traders are “buying the rumor”.

If the “news”, that is that the FOMC decides to raise the rates next week, is as expected then this may be a selling point for the market movers and we may see the USD unexpectedly drop in the wake of selling the news.

What If Rates Don’t Increase?

The what-if factor goes the other way; what if FOMC performs exactly opposite of what is expected? Well we still have Friday’s NFP report to give us an indication if that will happen, and the certainty of a rate hike may decrease at that point if Friday’s jobs report is less than expected, which may results in an early sell-off for the USD bulls.

Bottom Line

For now, we are still seeing a strong USD rally and we look forward to NFP Friday’s release to give us a better idea what to expect in the week ahead.

What do you think? Will the USD rally continue and what will be the results of the Fed’s meeting next week? Please leave a comment below with your thoughts.