Will The Fed Meet The Market’s Expectations?

Yesterday’s best performing currency was the British pound which rose in volatile trading from an intraday low at 1.3279 to a high of 1.3469. The reason for sterling’s climb was a tweet from BBC journalist Nicholas Watt who tweeted about a feeling among British lawmakers that a Brexit deal may be close. A deal is about 75 percent priced in in the pound’s recent rally. As for yesterday’s trades we were able to profit to either side and expect volatility to remain elevated within the next days.

GBP/USD

On the daily chart we see the primary uptrend still intact even though there have been high volatile price swings recently. We now focus on a trading range between 1.3550 on the upside and 1.31 on the downside. Any price breakouts above or below these levels could invigorate fresh momentum.

EUR/USD

The ‘sleepy’ euro provided zero chances for day traders recently, while it remains within the smallest trading range in over 12 months. We may see some more volatile movements today with the Fed decision and focus on important price levels such as 1.23 on the upside and 1.2050 on the downside- provided that price action gains momentum.

The FOMC meeting is this week’s top event risk and may give some life to the oversold U.S. Dollar, with recent comments from several members suggesting that the central bank will keep its monetary policy settings steady. Most economists expect no shift in the Fed’s monetary policy now but with the pandemic posing the risk of further lockdowns and Congress failing to agree on a relief aid, a minority is leaning toward a move this week. If the Fed is however not dovish enough to meet market expectations, we could see higher volatility in all USD crosses.

The Fed decision is scheduled for 19:00 UTC, followed by the press conference 30 minutes later.