We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Bearish
Bitcoin
Bearish
More View more
Real Time News
  • RT @globaltimesnews: A total of 1,052 cases of #coronavirus have been reported as of Jan 25 in #Hubei Province, with 129 in critical condit…
  • RT @FactSet: $SPX is reporting revenue growth of 2.9% for Q4, led by the Health Care (11%), Utilities (9%), and Communication Services (9%)…
  • The AUD has been hit by the risk-appetite pullback occasioned by the spread of Wuhan-strain coronavirus. This week may see domestic focus return, if headlines allow, with key inflation data due. Get your $AUDUSD market update from @DavidCottleFX here: https://t.co/UIpwno0pSq https://t.co/kib4d1mA0q
  • RT @anilvohra69: USD inverted (red) is correlated to Excess Reserves (blue) and Reserve Balances (green). 1/2 https://t.co/bbO1pPWY4F
  • RT @FactSet: $SPX is reporting a decline in earnings of -1.9% for Q4, led by the Energy (-42%), Consumer Discretionary (-14%), and Material…
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/6iMyDFqnqe
  • Knowing how to accurately value a #stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/2mjzvYvgSn
  • Previewing the Texas Rangers new home! https://t.co/WITZGSQPlc
  • Thanks for having me on @MartinSEssex https://t.co/fg8uOe16wr
  • The MACD is often used with its default setting when entering trades. However, this versatile indicator can be customized to assist traders in exiting trades too. Learn how to better incorporate the MACD into your trading strategy here: https://t.co/HnY7gzsI2q https://t.co/5F1DSvAXyy
US Dollar Seems to be Biased Upward on FOMC Rate Decision

US Dollar Seems to be Biased Upward on FOMC Rate Decision

2019-07-27 12:00:00
Ilya Spivak, Sr. Currency Strategist
Share:
DXY Price Chart

US DOLLAR FORECAST: NEUTRAL

  • US Dollar marches higher as markets trim FOMC rate cut bets
  • Market pricing may still be more dovish than the Fed endorses
  • ISM, payrolls data unlikely to overshadow central bank impact

See the latest US Dollar technical and fundamental forecast to find out what will drive prices in Q3!

The US Dollar marched steadily higher last week, tracking a shift away from dovish extremes on rate futures-implied Fed monetary policy expectations. The measured rise was only briefly interrupted by event-driven volatility – like the seesaw swings immediately after the ECB rate decision – but the conviction behind it never appeared to waver.

Pre-positioning ahead of next week’s fateful FOMC monetary policy announcement probably explains such purposeful recovery. The markets appeared to have run out of room to price in an ever-more accommodative Fed policy outcomes. That made for asymmetrically high risk of a less dovish central bank than asset price levels presumed. Some portfolio rebalancing was apparently in order.

US DOLLAR SEEMS BIASED UPWARD AFTER FOMC RATE DECISION

As it stands, the markets put the probability of a 25bps rate cut at 83 percent, while the chance of a 50bps reduction is at 17 percent. Tellingly, that leaves no room for an on-hold scenario yet clearly leans in favor of the smaller adjustment. A survey of recent economic data as well as commentary from Fed officials seems to support just such a result.

This likely means that the announcement’s market-moving potential will come from the accompanying statement as well as the follow-on press conference with Chair Powell rather than the rate change itself. Traders will use the tone of the rhetoric in both for guidance on whether further stimulus expansion is on the menu in the near term.

For their part, investors see the likelihood of further easing before year-end at a commanding 90 percent. A relatively even chance is being assigned to 50bps or 75bps of additional easing (34.4 and 37.9 percent, respectively). Coupled with the end of quantitative tightening – the Fed’s balance sheet reduction scheme – this amounts to expectations of a rather dramatic policy shift in a very short time span.

Once again, this seems to make the risk of a less-dovish outcome greater than the alternative. By extension, this means that the likelihood of a stronger US Dollar in the announcement’s aftermath is greater than that of a weaker one. Follow-on ISM and payrolls data may fractionally alter the weekly result one way or the other, but the Fed will probably have the defining say on where prices are headed.

--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

US DOLLAR TRADING RESOURCES

OTHER FUNDAMENTAL FORECASTS:

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.