One of the most powerful market movers in Forex is when the Federal Open Market Committee (FOMC) makes decisions on interest rates. The FOMC sets the discount rate or federal funds rate. The interest rates are set higher to produce foreign investment and fight inflation during times of prosperity and to lower spending during recessions. This makes it one of the main factors influencing the strength of the dollar in the foreign currency trading market. Economic indicators play a huge role for those Forex traders who use fundamental analysis and trade the news.
After the FOMC news is released there is great volatility in the Forex market. Volatility is what traders thrive on and this must be factored into the equation to make a profitable decision. The Forex market moves very rapidly following the FOMC interest decision, so a very short time frame for trading exists. The best charts to foillow at this time are the 3 and 5 minute charts.
