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
Mixed
GBP/USD
Bullish
USD/JPY
Bullish
Gold
Bullish
Oil - US Crude
Bullish
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
Bitcoin
Mixed
More View more
Real Time News
  • The ECB rate decision is a top fundamental event risk later today. It is unlikely that they add on top of September's flood, but path of least resistance is sticking to range and retail traders are heavy bears: https://t.co/GCyvs6nYth
  • South Korea Q3 GDP shows 0.4% growth print Q/Q, missing 0.3% estimate - BBG #USDKRW
  • #Gold: Buyers have remained at bay, even with the $USD sell-off, as a bull flag formation has built around a 23.6% retracement of that recent major move.Get your $gld market update from @JStanleyFX here: https://t.co/tkY4716pfC https://t.co/mik1bjz3Fo
  • #BRL, #COP and the #CLP are expected to be the most active Latin American currencies vs USD with 1-week implied volatilities at 13.55, 10.30 and 10.06 respectively
  • RT @LiveSquawk: News Recap - - Some BOJ Policy Makers Want to Save Ammunition - WSJ https://t.co/zweqHl37Ij
  • Australia’s CBA Australia PMI Composite (OCT P) Actual: 50.7 Est: N/A Previous: 52.0 CBA Australia PMI Mfg (OCT P) Actual: 50.1 Est: N/A Previous: 50.3 CBA Australia PMI Services (OCT P) Actual: 50.8 Est: N/A Previous: 52.4 #AUD
  • With Tesla up nearly 20% in after-hours trading, the company has seen its market cap balloon by roughly $9b from $45.5b to $54.4b Pretty incredible short squeeze if you ask me $TSLA
  • Tomorrow holds a few high profile fundamental updates: ECB decision (mon pol) and PMIs (recession fear). But, this pales in comparison to the densely packed run of key events for next week (US and EZ GDP, FOMC decision, BOJ forecasts, Chinese industrial profits; sentiment surveys
  • Heads Up:🇦🇺 AUD CBA Australia PMI Composite (OCT P) due at 22:00 GMT (15min), Actual: N/A Expected: N/A Previous: 52.0 https://www.dailyfx.com/economic-calendar#2019-10-23
  • Heads Up:🇦🇺 AUD CBA Australia PMI Services (OCT P) due at 22:00 GMT (15min), Actual: N/A Expected: N/A Previous: 52.4 https://www.dailyfx.com/economic-calendar#2019-10-23
US Dollar Price Volatility Report: USD Eyes Data, Fed-Speak

US Dollar Price Volatility Report: USD Eyes Data, Fed-Speak

2019-09-20 19:30:00
Rich Dvorak, Junior Analyst
Share:

US DOLLAR CURRENCY VOLATILITY SET TO RISE WITH ECONOMIC DATA & FED SPEAKERS ON DOCK NEXT WEEK:

  • The US Dollar faces serious event risk next week with Fed speakers and high-impact economic data releases on deck, which will serve as sources of volatility
  • USD price action turns to US-China trade talks in addition to consumer confidence reports, PMI data and core PCE inflation figures as catalysts that spark the currency’s next direction
  • IG Client Sentiment reveals insight on the bullish and bearish biases of retail forex traders

We noted in our last US Dollar price volatility report that the greenback has lacked conviction over its next direction even despite a monetary policy update from the Federal Reserve. At the same time, US Dollar implied volatility readings have ebbed now that the immediate risk surrounding the September FOMC rate decision is in the rearview mirror. Looking ahead, however, a barrage of economic data releases in addition to speeches from Fed officials next week stand to spark USD price action.

US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (1-WEEK)

US Dollar Price Volatility & Implied Trading Ranges Table

The DailyFX Economic Calendar details several US economic indicators on deck, which forex traders will weigh against the fundamental backdrop for the US Dollar as it relates to future Fed policy decisions. The FOMC decided to cut its benchmark interest rate for the second time this year citing “implications of global developments for the economic outlook as well as muted inflation pressures.”

The central bank also stated that it will closely monitor “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.” As such, US manufacturing and services PMI data as well as consumer confidence and core PCE inflation figures will likely serve as the major catalysts behind the market’s Fed rate cut expectations, which, in turn, stand to help propel the US Dollar out of its recent choppy trading range.

US DOLLAR RISK REVERSALS (1-WEEK)

US Dollar Risk Reversal Price Chart EURUSD GBPUSD USDJPY USDCHF USDCAD AUDUSD NZDUSD USDSEK USDMXN USDCNH

US Dollar risk reversals seem to hint at a growing bullish bias for the world’s reserve currency across 1-week forex options contracts on EURUSD, USDCHF, USDCAD, AUDUSD, NZDUSD and USDMXN. On the other hand, GBPUSD, USDJPY, USDSEK and USDCNH 1-week risk reversals point to currency traders insuring against US Dollar downside with respect to these pairs. Forex risk reversal metrics reflect the difference between the implied volatility on out-of-the-money call options relative to out-of-the-money put options (i.e. a positive risk reversal for a given currency pair suggests that traders are anticipating higher spot prices).

FED RATE CUT EXPECTATIONS (DECEMBER 2019)

Fed rate cut expectations price chart

The convergence between the market’s priced rate cut expectations and projections from Fed officials is expected to overwhelmingly drive USD price action going forward. According to the latest overnight swaps data pulled from Bloomberg, there is a 65% probability that the Fed will cut rates by at least 25-basis points between now and year end. This is a stark contrast to the revised economic projections released by FOMC members a few days ago, who listed the official median forecast for the Federal Funds Rate (FFR) at 1.9% seeing that we currently sit at a range between 1.75-2.00%.

That said, if next week’s high-impact data readings cross the wires above consensus estimates, the greenback will likely gain ground as it stands to undermine prospects for future dovish action from the Fed. Conversely, evidence of increasing downside risks to the US economy could fuel an acceleration in Fed rate cut bets, which would weigh negatively on the US Dollar.

At the same time, the US Dollar stands to gyrate in response to US-China trade war headlines. Also, FOMC member commentary from John Williams, James Bullard and Charles Evans will likely sway USD price action as markets digest additional insight from Fed officials on the central bank’s latest monetary policy stance. Williams and Evans voted in favor of the latest 0.25% FOMC rate cut while Bullard preferred a more aggressive 50bps rate cut.

DXY US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (APRIL 10, 2019 TO SEPTEMBER 20, 2019)

DXY US Dollar Index Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

The technical backdrop for the US Dollar remains unchanged as the currency continues to drift sideways on balance. This has resulted in the recent emergence of a symmetrical triangle pattern on the DXY Index – a commonly referenced basket of major USD pairs. The symmetrical triangle pattern illustrated by the light blue trendlines extended from the series of lower highs and higher lows since August - in addition to the confluent support and resistance levels we have previously highlighted in our US Dollar price volatility reports published daily - is expected to keep the greenback anchored until a fundamental catalyst sparks its next major move.

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

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

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

DISCLOSURES

News & Analysis at your fingertips.