Hawkish Expectations

The June FOMC meeting tonight holds the potential to be a pivotal catalyst for FX markets over the coming months. With the US Dollar heavily sold over the last quarter, a shift in view here will fuel a heavy unwinding of short positions, sending USD higher. The main focus is on tapering and the extent to which the Fed discusses scaling out of it huge easing program. If the Fed today acknowledges that tapering will be necessary this year and/or points to a target data, this should see USD firmly higher. Focus will also be placed on the dot plot forecasts, any hawkish developments there will also be bullish for USD.

Where to Trade the FOMC?

USDCHF

I’ve been tracking a potential break higher in this pair for around a month now. While price remains within the bear channel, bullish divergence has been growing on the RSI and the MACD has turned bullish, with price failing to break the .8926 low. A hawkish meeting today should see price breaking the channel. I’ll be looking for longs on a break of .9043, targeting .9189 initially.