USD PRICE ACTION TURNS TO JULY FED MEETING
- The US Greenback is primed for volatility and can possible be sparked by Wednesday’s July Fed assembly
- EURUSD and USDJPY 1-week implied volatility readings, though muted, recommend a looming breakout from technical confluence
- Register for live webinar coverage of the July Fed Rate Decision hosted by DailyFX Chief Forex Strategist John Kicklighter
The US Greenback appears to be like to take the highlight as foreign money merchants anxiously await the end result of the July Fed meeting slated for launch Wednesday at 18:00 GMT. A discount within the federal funds charge has been lengthy priced in, however the dimension of the anticipated Fed charge reduce stays ambiguous. As such, the July Fed assembly poses a serious menace to the US Greenback and stands to spark currency volatility.
US DOLLAR 1-WEEK IMPLIED VOLATILITY & TRADING RANGE CHART
Curiously, USD implied volatility measures seem comparatively suppressed given the high-impact occasion danger surrounding the FOMC charge determination. tenors additional out, nonetheless, we see that the implied volatility curve is inverted for the most important USD pairs and signifies that foreign money possibility merchants are putting better emphasizing on the near-term. That stated, a serious transfer in USD tomorrow following the Federal Reserve’s up to date monetary policy stance dangers sparking volatility throughout the foreign money market.
US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (OCTOBER 29, 2018 TO JULY 30, 2019)
A violent repricing in lofty Fed charge reduce bets (which at the moment stand at round 75 foundation factors of easing by year-end) might function the catalyst – notably if Chair Powell communicates a agency outlook and conveys that the transfer to decrease charges on the July Fed assembly was a ‘one-and-done insurance coverage reduce.’ This situation, if confirmed, will possible see the US Greenback lengthen its stretch of beneficial properties and push onward to check year-to-date highs measured through the DXY Index. The potential for a breakout – or breakdown – within the US Greenback can be instructed by the 1-week implied volatility measures for main pairs like EURUSD and USDJPY.
EURUSD PRICE CHART: DAILY TIME FRAME (DECEMBER 21, 2018 TO JULY 30, 2019)
EURUSD 1-week implied volatility of 5.85% leads to a 1-standard deviation buying and selling vary between 1.1062 and 1.1242. These option-implied higher and decrease bounds are outdoors of the most important technical confluence on the 1.11 and 1.12 handles. As such, a serious transfer in spot EURUSD that smashes by these key technical ranges might present proof of the US Greenback’s resurgence or a looming reversal within the dollar. In flip, foreign money volatility stands to rise off the at the moment subdued readings.
USDJPY PRICE CHART: DAILY TIME FRAME (APRIL 22, 2019 TO JULY 30, 2019)
In response to USDJPY 1-week implied volatility of 6.01%, the foreign money pair is calculated to commerce between 107.85 and 109.37 with a 68% statistical chance. Much like the setup in EURUSD, the options-implied buying and selling vary in spot USDJPY aligns outdoors the important thing ranges of technical help and resistance on the 108.00 and 109.00 handles respectively. If spot USDJPY makes a transfer outdoors these intently watched ranges, foreign money value motion might be exacerbated and stoke further foreign exchange volatility.
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