The US dollar index keeps rounding above the 103.60 historical support level. The buyers have already defended this level for three weeks, highlighting their interest in the greenback. Thus, buying USD looks less risky right now.
The Fed’s meeting will drive the USD
What will happen?
The Federal Reserve will release its statement and announce its interest rate decision at 21:00 MT time. Then, at 21:30 MT time, the central bank will hold a press conference.
Each meeting of the regulator draws the attention of the trading community. The central bank has to comment on the recent data releases, give its estimate of the US economy and outline its plans for stimulus and interest rates. The better the US economic figures, the higher the pressure on the Fed to start normalizing policy. In the past weeks, America has released some decent numbers, so traders will sit nervously in front of their monitors waiting for Jerome Powell and his colleagues to give the market some signal.
How to trade on the Fed interest rate decision and press conference?
The logic is simple. If the Federal Reserve admits that the American economy is doing fine, the USD will strengthen. If it hints that the time to raise interest rates may come earlier than expected, the USD will strengthen. If the Fed becomes concerned with rising inflation, the USD will strengthen. If the actions of the US central bank are the opposite, the USD will weaken.
Let’s summarize these considerations:
- If the Fed is optimistic, the US dollar will go up.
- If the Fed is uncertain or cautious, the US dollar will go down.
Instruments to trade: EUR/USD, USD/JPY, GBP/USD, XAU/USD.
On the H4 timeframe, the US dollar index has formed a bullish falling wedge. At the beginning of the trading session, the price is testing the upper border of this wedge. Thus, in case of a higher-than-expected Core PCE Price Index m/m, the US dollar will skyrocket against other currencies.
Happy Wednesday, traders! We went through the Internet and found the best news for you, take a look!
This week may be the most important since the year started as the Fed assess the economic outlook and the US presents fresh NFP readings.
S&P Global, a private banking company, will release a monthly change in British Flash Manufacturing Purchasing Managers Index (PMI) on January 24, 11:30 GMT+2. The index is a leading indicator of economic health as businesses react quickly to market conditions, and purchasing managers hold the most current and relevant insight into the company's view of the economy.
The United States Bureau of Labor Statistics will publish the US Consumer Price Index (CPI) m/m on January 12 at 15:30 GMT+2. The index measures a change in the price of goods and services purchased by consumers.