In just a few hours, volatility in the U.S. dollar could pick up once again with the latest monetary policy decision from the Federal Open Market Committee. Will see any surprises to spark further momentum or a big reversal in USD/CHF?
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on GBP/NZD ahead of the BOE monetary policy meeting, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Stocks surge as post-election rally continues, Dow up more than 600 points
Bank of England boosts bond buying as new coronavirus lockdown begins
In a divided U.S., Biden inches nearer to victory as Trump pursues litigation
2020 October Job Cuts Report: 80,666 Cuts as Employers Grapple With Uncertainty
Initial jobless claims: 751K last week vs. 758K the week prior
Eurozone Construction activity falls further in October
German manufacturing new orders were up 0.5% m/m
Global economic growth fastest in over two years in October – JP Morgan Global Composite PMI
Chancellor Rishi Sunak to extend furlough scheme to end of March
Royal Bank of Scotland Report on Jobs:
Permanent appointments fall at quicker rate in
October
U.K. Construction growth slows in October
SECO Consumer Sentiment: -13 in Q3 2020 vs. -12 in Q2 2020
Upcoming Potential Catalysts on the Economic Calendar
FOMC Monetary Policy Statement at 7:00 pm GMT
FOMC Press Conference at 7:30 pm GMT
Australia Services Index at 9:30 pm GMT
Japan Household spending at 11:30 pm GMT
RBA Statement on Monetary Policy at 12:30 am GMT (Nov. 6)
What to Watch: USD/CHF
On the one hour chart above of USD/CHF, we can see the Greenback has been wrecked in the fallout of the U.S. Presidential election, mainly on the idea of more stimulus coming to the U.S. with Biden potentially winning, or at the very least, on the idea of no sweeping regulations ahead with the U.S. Senate remaining mainly in Republicans hands.
That’s brought the pair to a major support area around the 0.9050 area, one that has been the jump off for bullish runs over the past three months. Will we see that behavior once again?
Well, we do have a major event that could keep volatility up for the pair, one that’s kind of been forgotten among the U.S. election coverage, the latest monetary policy decision from the Federal Reserve later today at 7:00 pm GMT. But to be honest, expectations are for Powell and the gang to hold off on any changes given the U.S. election event. It’s likely we’ll continue to hear the same rhetoric of lower interest rates for longer and calls for fiscal stimulus is needed.
So for today, we’re looking out for any surprises from the FOMC this afternoon as it may spark big moves in the U.S. dollar.
And if you’re a bear on the pair, you’ll want to see rhetoric for increased monetary policy stimulus, including upping their purchase of longer-term debt. In combination with broad risk-on sentiment, the price action to look for is a break of the 0.9050 area before considering a short position for either a day trade/scalp or fresh swing position.
If you’re a bull on the pair, it’s a low probability that we’ll get any hints of ending stimulus any time soon (or realistically thought of thinking about reducing stimulus any time soon), then that could spark a bounce in the Greenback. Again, it’ll likely take that scenario plus broad negative risk sentiment for a sustained move higher, but if we do see a bounce, catching short-term pips (around 1/2 to 1 daily ATR’s worth) is not an unreal expectation for potential gains.
