USD/CHF Options-derived Range, Price Levels for FOMC Week
- One-week implied volatility at 9.39%, suggest 1-stdev range of 9470-9720
- Lower and upper thresholds near key price zones
- FOMC on Wednesday to spark volatility, but can range break?
The importance of trading psychology can’t be understated. Check out this beginner’s guide – Building Confidence in Trading.
In the following table, you’ll find levels of implied volatility (IV) for major USD-pairs looking out over the next one-day and one-week time-frames. Using these levels, we’ve derived the range-low/high prices from the current spot price within one-standard deviation for specified periods. Statistically speaking, there is a 68% probability that price will remain within the lower and upper-bounds.
USD/CHF one-week projected range in rough alignment with price zones as we head into FOMC on Wednesday
On Wednesday, the FOMC will announce its decision on rates and outlook for future adjustments. There is nearly a 0% chance priced in for a rate increase as per Fed Funds futures, but more than a 50% chance for the December meeting. All attention will be on whether the Fed boosts or undermines expectations for the final month of the year.
The US dollar has been weak across the board for the most part, but not so much against the Swiss franc since July. The overall price action the past couple of months in USDCHF has been one of range with only a slight downward bias. The projected one-standard deviation one-week range of 9470 to 9720 suggests more of the same to come in the next week. When looking at price support and resistance, there is some alignment between what options are saying and where buying and selling interest lies. There is good support down in the 9440/20 vicinity and resistance from around 9705 up to 9773. If the Fed strongly indicates one way or another which way it is leaning then perhaps we will see a surprise range-break. But reacting to the break rather than predicting it looks to be the most prudent approach for handling the current situation.
For other currency volatility-related articles please visit the Binaries page.
Join Paul live each week; for details please see the Webinar Calendar.
---Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.