Modest FED-Week Open For USD - Forex News by FX Leaders
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Modest FED-Week Open For USD

Posted Monday, October 28, 2019 by
Shain Vernier • 2 min read

FED-week is upon us and the USD isn’t doing much vs the majors. Tight ranges have been the forex rule on this Monday session as most Greenback-based pairs have shown moderate volatility. The headlines of the U.S. forex session have been a bullish breakout in the USD/JPY and whipsaw action in the USD/CHF. 

Wednesday marks the second-to-last meeting of the FED for 2019. It has been a blockbuster year for monetary policy, with July and September bringing back-to-back rate cuts for the first time since the financial crisis of 2008. Will 30 October bring a third consecutive ¼ point cut to the USD? Below is a current look at the CME FEDWatch’s rate cut odds for Wednesday’s announcement:

Cut                                             Probability 

¼ Point                                             95.1%

½ Point                                              0.0%

Unchanged                                       4.9%

At the moment, there is about a 95% chance that the Federal Funds Target Rate is coming down to 1.50-1.75% at the 30 October meeting. Due to global economic uncertainty and a month of sub-par U.S. metrics, the rate cut is widely projected by the markets. Even though these expectations are overtly dovish, the USD is holding relatively firm vs the majors.

USD/CHF In Range Of Par

Over the past month or so, par value has been a key area of topside resistance for the USD/CHF. Once again, this important psychological barrier is coming into view.

USD/CHF, Daily Chart
USD/CHF, Daily Chart

Here are the levels to watch in the Swissy as the FOMC meeting approaches:

  • Resistance(1): Psyche Level, 1.0000
  • Support(1): Bollinger MP, .9934
  • Support(2): Daily SMA, .9925

Bottom Line: At this point, one has to believe that a Wednesday FED rate cut has already been priced into the USD. In addition, the Brexit extension does relieve a bit of the immediate uncertainty and is likely to reduce the bids hitting safe-havens. Subsequently, a continuation of the recent bull run in the Swissy is possible.

If rates of the USD/CHF do continue to rise, a sell from just beneath par is an ideal way to play the action. Until elected, I will have sell orders in the queue from .9989. With an initial stop at 1.0032, this trade produces 30 pips on a sub-1:1 risk vs reward management plan.

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About the author

Shain Vernier // US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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