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November 21, 2019
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US Dollar Price Volatility Report: FOMC Minutes & Powell Eyed

US DOLLAR CURRENCY VOLATILITY EYES SEPTEMBER FOMC MINUTES & FED CHAIR POWELL SPEECHES

  • The US Dollar bounced additional off technical assist and will open the door to retest year-to-date highs
  • September FOMC minutes and the most recent commentary from Federal Reserve (Fed) Chair Jerome Powell might function catalysts that assist propel the dollar increased
  • Download our free 4Q-2019 Forecasts & Trading Guidesfor complete basic and technical perception on the US Dollar

Markets stay on edge forward of US-China commerce talks set to kick off later this week. Terse headlines lobbed forwards and backwards between Beijing and Washington has dented danger urge for food, which is probably going serving as a tailwind to US Dollar worth motion. The US Dollar can be gaining extra broadly amid notable draw back in GBP/USD and EUR/USD owing to the continued deadlock between London and Brussels that’s elevating the chance of no-deal Brexit.

Also contributing to the dollar’s efficiency at the moment included a a lot better-than-expected US small enterprise optimism report and the most recent commentary from Federal Reserve officers. Looking forward to Wednesday’s buying and selling session and for catalysts outdoors of commerce wars, one other speech from Fed Chair Powell is on deck along with the discharge of the September FOMC minutes – all of which stand to spark volatility within the US Dollar.

US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (APRIL 12, 2019 TO OCTOBER 08, 2019)

Chart created by @RichDvorakFX with TradingView

The every day publishing of this US Dollar worth volatility report has regularly highlighted the 98.75 worth stage on the DXY Index – a well-liked basket of main US Dollar foreign exchange pairs. I famous that this space of confluence, which can be underpinned by its 20-day easy transferring common, had sturdy potential to maintain USD worth motion afloat.

The US Dollar Index now trades comfortably above this assist zone and opens up the door to re-target its year-to-date excessive close to the 99.50 mark. Should the aforementioned assist stage fail to carry as soon as extra, the US Dollar might seek for assist round 98.25 the place the 38.2% Fibonacci retracement and 50-day easy transferring common might bolster the dollar.

SEPTEMBER FOMC MINUTES & POWELL COMMENTARY SET TO JOLT US DOLLAR PRICE ACTION

Federal Reserve September FOMC Meeting Projections 2019

The September Fed assembly revealed the central financial institution’s determination to chop rates of interest for the second time this 12 months – largely aiming to insulate the American financial system from rising draw back dangers and speed up stubbornly low inflation. The September Fed assembly press assertion was accompanied by the newest replace to FOMC member financial projections, which detailed officers’ median estimate for the projected federal funds price (FFR). Seeing that the present goal FFR vary falls between 1.75-2.00% and the median estimate for 2019 from Fed officers is listed at 1.90%, it seems that the central financial institution prefers to depart its coverage rate of interest unchanged for this 12 months.

This compares to the 81.1% likelihood at the moment priced in by markets that the subsequent FOMC assembly later this month will announce a 3rd consecutive 25-basis level rate of interest minimize. Moreover, there’s practically a 50.zero% likelihood that the goal FFR will relaxation at 1.25-1.50% (i.e. one 50-basis level minimize or two 25-basis level cuts from present FFR) by the tip of the 12 months in line with the most recent in a single day swaps pricing pulled from Bloomberg. That stated, the US Dollar faces a fabric upside danger contemplating the market’s Fed price minimize expectations seem too dovish relative to FOMC projections, which I beforehand famous in considered one of my prior US Dollar worth volatility experiences.

Alas, particulars discovered within the September FOMC minutes on deck for launch Wednesday at 18:00 GMT might power a convergence between Fed and market expectations. Yet, it’s value mentioning that the September FOMC minutes are a bit stale and outdoors the scope of high-impact financial experiences launched for the reason that central financial institution final met like dismal manufacturing and providers PMI information. As such, the most recent commentary from Fed Chair Jerome Powell anticipated at 14:30 GMT might have a stronger affect on US Dollar worth motion.

US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (OVERNIGHT)

US Dollar Price Implied Volatiltiy & Trading Ranges

USD/CNH stays in focus with the US and China set to kick off their 13th spherical of commerce negotiations later this week. While Vice Premier Liu He and different Chinese officers are set to fulfill with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer on October 10-11, US-China commerce conflict headlines are already crossing the wires which stands to strongarm market sentiment and the US Dollar. Take a take a look at how the Chinese Yuan can function a US-China commerce conflict barometer.

On the subject of commerce wars, EUR/USD should stay in focus as markets nonetheless await the response and potential retaliation to the $7.5 billion in items Trump plans to levy tariffs on stemming from the WTO Airbus case. Also, USD/JPY and USD/CHF ought to be saved within the crosshairs as these notably rate of interest delicate foreign money pairs might react sharply to sizable modifications in dovish Fed financial coverage expectations.

US DOLLAR RISK REVERSALS (OVERNIGHT)

US Dollar Risk Reversal Price Chart

Ahead of Wednesday’s buying and selling session, it seems that foreign exchange choices merchants have a bearish bias on the US Dollar judging broadly by in a single day danger reversals. A danger reversal studying above zero signifies that the demand for name possibility volatility (upside safety) exceeds that of put possibility volatility (draw back safety). The IG Client Sentiment Report, which particulars shopper positioning throughout a wide range of currencies and property, is up to date in real-time and in addition supplies perception on the bullish or bearish biases of merchants.

— Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market perception

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