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US Dollar Outlook: USD/KRW Downtrend May Slow Ahead of FOMC

US Dollar Outlook: USD/KRW Downtrend May Slow Ahead of FOMC

2019-10-29 00:00:00
Dimitri Zabelin, Analyst
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US Dollar Outlook, USD/KRW – TALKING POINTS

  • USD/KRW decline may abate if US Dollar strength swells ahead of FOMC
  • South Korean business survey data reinforces regional slowdown concerns
  • KRW, Kospi will be closely watching Samsung earnings after Fed decision

Learn how to use political-risk analysis in your trading strategy!

Earlier this month, USD/KRW broke below an eight-month uptrend and exposed the pair to the 1152.50-1129.50 support zone. While this target remains in play, the pair’s descent could be softened if the US Dollar strengthens ahead of the FOMC rate decision. Earnings reports could also help the pair trim some of its losses if Q3 profit margins show a slimmer reading and spook markets and cause investors to flee to the Greenback.

Heads up: Samsung Q3 earnings will be published on Thursday. Follow me on Twitter @ZabelinDimitri to get a market preview of the report and its impact on the South Korean Won and Kospi Index.

USD/KRW Technical Outlook

As mentioned in my previous USD/KRW forecast, the pair’s recent decline and break below the February 2019 uptrend had less to do with strength in the Korean Won and more with weakness in the US Dollar. The primary forces behind the Greenback’s decline were most the result of optimism about a Brexit deal and US-China trade negotiations over a “phase 1” deal was coming close to an end.

South Korean Won and US Dollar Index – Daily Chart

Chart showing US Dollar Index

USD/KRW chart created using TradingView

While downside movement gained momentum after the pair successfully closed below the uptrend for two consecutive days, traders may wait to add additional exposure until the pair test the 1152.50-1129.50 floor. A break below the lower level exposes USD/KRW to an over-one percent drop to 1140.0. Traders may find this setup more attractive than entering short now with a less than 0.7 percent decline until the pair hits 1159.50.

USD/KRW – Daily Chart

Chart showing USD/KRW

USD/KRW chart created using TradingView

However, traders may wait to commit additional capital until the FOMC rate decision and subsequent press briefing. If the Fed is less dovish than expected, it could push the US Dollar higher at the expense of equities and emerging markets. USD/KRW’s descent may also be slowed after South Korea published poor business survey data that may pressure the South Korean Won and amplify the pair’s potential reversal.

US DOLLAR TRADING RESOURCES

--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

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

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