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Tomorrow is a big day as traders have been anticipating the FOMC rate decision for what seems like forever now. We’ve seen much debate in the media (from economists, market pundits, traders, etc.) and quite frankly, it’s still up in the air on what will happen tomorrow. Market consensus is calling for an almost guaranteed 25 bps hike tomorrow, which should already be priced into the market, but the thing to pay attention to is the Fed statement. Are they going to continue their hawkish tone or will they hint at a pause or possibly stop the rate hikes all together? Again, who knows? That’s why the markets are quiet and traders are on the sidelines waiting for the Fed to speak. All we can do now is prepare a trade and expect the unexpected, and that’s what we’re going to do – trade the unexpected.

I will look for a long trade in GBP/USD if we see rates raise by 25 bps or less, AND the Fed comes out with a dovish tone on future changes to monetary policy.

I will look for a short trade in GBP/USD if we see rates raise by more than 25 bps and the Fed stays hawkish or hints at further rate hikes.

Long GBP/USD at 1.8300, stop at 1.8280, pt1 at 1.8330, pt2 at 1.8350

Short GBP/USD at 1.8075, stop at 1.8100, pt1 at 1.8045, pt2 at 1.8025

Depending on what happens during the European and New York trading sessions, I may hold off until right before the interest rate statement is released before entering any orders. I suggest being very cautious tomorrow; we could see a lot of volatility and whipsaws after the report. If you’re up for the week it may be a good idea to sit this one out.

Good luck and good trading!

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