US Federal Reserve To Release Reports Friday


By Darrell Martin

Capacity Utilization Rate, Industrial Production and Manufacturing Production are the titles of reports being released Friday, March 16, by the US Federal Reserve. All reports are indicators or measurements of inflation and can cause movement in the market.

The Capacity Utilization Rate is the percentage of production capacity of places such as factories, mines and utilities being utilized in the US. It reflects growth and demand in the economy. This month’s report is forecast to increase slightly from 77.5 percent to 77.7 percent.

Industrial Production measures the change in production by manufacturers, mines and utilities in the US. It is forecast to raise from -0.1 percent last month to 0.3percent this month.

Manufacturing Production is similar to Industrial Production but it measures only the change in the value of output production by manufacturers. It is also forecast to increase from 0.1 percent last month to 0.5 percent this month.

This news can be traded using an unbiased directional strategy such as the Iron Condor. Often, markets will react to news releases and make a quick move or a larger than usual move. After the move, the market will pull back. It is on the pull back that the Iron Condor strategy can profit. Using Nadex spreads, a capped risk instrument, the trader can sell a top range of the market and buy a lower range of the market.

The Iron condor is set up by buying one spread below the market with the ceiling of its range meeting where the market is currently trading. Another spread is sold above the market. This spread should have the floor of its range meeting where the market is trading and the ceiling of the bought spread. The market can move either direction. Profit is made when the market pulls back close to where it was at entry. Alternatively, the market can just range there as well and profit be made.

The reports will be released at 9:15 AM ET. Traders could enter an Iron Condor Nadex EUR/USD spread trade as early as 8:00 AM with a 10:00 AM ET expiry. An example of a combined profit potential would be $30 with $15 on each spread. That will put the bid and ask approximately 15 pips or more below and above market respectively. The market can settle as far as 30 pips above and below where the market is at entry and profit. Those are the breakeven points.

Risk is capped. The market can move past the floor and ceiling of the combined spreads and risk will stop at those points. The 1:1 risk reward ratio points are where the market would hit 60 pips above and below from where the market was at entry. Simply double the amount of the combined profit potential to find this number.

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