What the FOMC Fed Announcement Could Mean for Futures Traders

What Futures Traders Can Take Away from the September FOMC Fed Announcement 

Traders should be cautious when trading in front of a news event such as a Fed announcement, as volatility can increase dramatically. While that can be enticing from a “catch a trend” aspect, it can also introduce risk that a stop limit order might not contain. Consider this: 96% of the trading range in the E-mini S&P futures occurred in the 2 minutes after the FOMC announcement (though the market did make a slightly lower low near the end of regular trading hours before rallying 15 points into the session close). This velocity in which price moved is a reason why some traders wait for some of the dust to settle before re-entering the market. 

 
Despite a 50 basis point rate cut, which only became a possibility when the jobs market showed some signs of weakening, Bond futures (ZB) did not get a sustainable boost with this news, suggesting that the treasury futures market may have had a 50-basis point cut already priced in. Gold also saw a decline after making new highs, falling from the R2 Pivot level (2,625.5) until it found support at S2 (2,572.7) before rallying to S1 (2584.6) to finish the session. 

Overall, this announcement seemed to cool most markets, with the E-mini Russell 2000 and Micro-Bitcoin futures finishing positive on the day. Fed speakers will begin communicating their messages on Friday, as market participants will speculate on the Fed's next move in the November meeting.