Partner Center Find a Broker

The Fed is up this week! What are traders expecting from the event and how could the dollar react?

Here are catalysts you should watch out for if you’re trading the Greenback this week:

FOMC statement (Jan 29, 7:00 pm GMT)

  • The Fed kept its policies and GDP projections unchanged but lowered its inflation forecasts last December
  • Fed’s “dot plot” suggested no interest rate hikes in 2020
  • Powell shared that a rise in inflation needs to be “significant” and “persistent” to provoke a rate hike
  • USD dropped across the board and stayed in its post-FOMC levels until the next day when optimism over the U.S.-China trade deal propped it higher
  • With no material change in the economy since the last meeting, markets expect the Fed to keep its policies unchanged in January
  • The Fed won’t print new economic and dot plot projections until March

Advance GDP report (Jan 30, 1:30 pm GMT)

  • Analysts see the annualized U.S. GDP remaining at 2.1% in Q4 2019
  • Consumer and government spending are expected to slow down, while disruptions in Boeing’s production could also make for volatile initial GDP results
  • Take note that Uncle Sam’s advance GDP reading is usually adjusted in the second and third readings

Core PCE price index (Jan 31, 1:30 pm GMT)

  • Traders expect core PCE to maintain its 0.1% growth in December
  • Core personal consumption expenditures is said to be the Fed’s “preferred” measure of inflation
  • Powell recently noted that there would need to be “significant” and “persistent” rise in inflation before they talk rate hikes

Market risk sentiment

  • The impact of coronavirus on economic activity can continue to weigh on risk-taking
  • Earnings reports of major U.S. companies due this week can affect demand for the U.S. dollar
  • Other top-tier events, such as Britain’s official exit from the EU, BOE’s policy announcement, and China’s official PMI reports can also affect overall risk appetite

Technical snapshot

  • Stochastic is flagging USD’s “overbought” status against EUR, AUD, and CAD on the daily time frame
  • Williams %R considers USD as “overbought” against EUR, AUD, NZD, and CAD
  • Bollinger Bands are seeing USD’s “overbought” conditions against CAD
  • Daily time frame Keltner Channel is seeing USD in the “overbought” zone against AUD

  • EUR/USD and AUD/USD are trading below its short and long-term SMAs
  • USD/JPY and NZD/USD are trading below their 5, 20, and 50 SMAs but still above their 200 SMAs
  • USD/CAD is trading above its 5, 20, and 50 SMAs but below its 200 SMA
  • USD/CHF is currently above its short-term SMAs but still below its longer-term SMAs
  • GBP/USD is already below its short-term SMAs but still above its longer-term SMAs

Missed last week’s price action? Read USD’s price recap for January 20 – 24!