On October 28, ATFX Evening Commentary: At 02:00 on Thursday (today's US session), the Federal Reserve will announce its interest rate decision, with expectations that the upper limit will remain unchanged at 4.00%. Half an hour later at 02:30, Fed Chairman Warsh will hold a monetary policy press conference, with focus on his remarks regarding inflation and the rate path.
Figure 1, Fed Rate Decision Calendar - ATFX Market Expectations. The Fed is not expected to adjust rates at this meeting. CME's forecast shows a 90.6% probability of standing pat, which can be described as "set in stone." The Fed already raised rates once in September, and October is the period when policy effects take hold, so there is no need to adjust the benchmark rate. The next rate hike may come in December, provided that international oil prices remain elevated and US core inflation data continues to deviate from the 2% target level.
Based on experience, no matter how high the probability of a rate hike or standing pat predicted by CME, the final result could always turn out the opposite. Small-probability events always exist, and when they occur, XAUUSD and EURUSD tend to experience more violent price swings. The risk-reward ratio of betting on one direction is not high; instead, the two-way "Double Swallow Strategy" is better able to survive such extreme one-sided moves.
EURUSD Double Swallow Strategy Design (M5 Timeframe)
(Pure EA trading, eliminating manual operation.) Order placement conditions: 1. Place orders 1 to 5 minutes before the data release, depending on market volatility; the stronger the volatility, the closer the order placement time is to the data release. 2. Place a buy stop above the market price and a sell stop below the market price. 3. The distance P between the pending order and the market price is fixed at 15 to 30 basis points (for EURUSD only). The specific choice depends on market volatility; the greater the volatility before the data release, the larger the P value; conversely, the smaller it is.
Closing conditions: 1. Use a trailing stop as a take-profit. 2. When one side is triggered, immediately cancel the other side. 3. Fixed take-profit of 50 basis points. 4. After holding for 5 minutes, halve the position; after holding for 10 minutes, close the position entirely. 5. If neither pending order is triggered after the data release, cancel the orders after 5 minutes.
Trading Environment
The Double Swallow Strategy has extremely high requirements for low latency and stability of the trading platform. Within one minute after the data release, if issues such as platform freezing, unreasonable price gaps, or high latency occur, data execution will be severely compromised. Therefore, the trading environment needs to be tested in advance. It is not recommended to operate on a new or untested platform.
Spread Costs and Spread Widening
The average spread for EURUSD is around 1.8 basis points, and ECN accounts are even lower. For data-driven events like rate decisions, a spread of 1.8 basis points is completely acceptable, because the expected profit margin is 50 basis points, giving a clear advantage. However, the biggest problem with data-driven markets is spread widening. If the spread widens to abnormal levels after the data release, the strategy should be terminated.
ATFX Risk Warning, Disclaimer, and Special Statement
Markets carry risks, and investment requires caution. The above content represents only the analyst's personal views and does not constitute any trading advice. Please do not treat this report as the sole reference. The analyst's views may change at different times, and updated content will not be notified separately.
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