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USD/CHF Analysis Ahead of FOMC

Oct 30 2019, 08:15 PM (BDT) |


Today’s main focus will be on the United States and FOMC Interest Rate decision, but first let’s see what’s the update on Brexit. 

On Tuesday, UK Members of Parliament voted for a general election set for December 12th, 2019. MPs voted 438 votes to 20 in favor. The bill should become law by the end of the week once it passes the House of Lords, where opposition is not expected. Then there is going to be a vigorous 5-week campaign until poll day, where PM Johnson is expected to win back House majority. But that’s too soon to call, 5 weeks is a long time for the political unexpected.  

The United States Federal Reserve is highly expected to ease monetary policy for the third, consecutive time this year. Prior to this, 3 rate cuts in a row were back during the 2008 crisis. There have been bad and good macro-economic releases since the last rate cut, but the weight of the bad overpowers the good and may justify one final rate cut. 

In the most recent release, better than expected ADP Nonfarm employment came in at 125K ahead of the forecasted 120K and previous 93K. The GDP is also ahead of expectations, reported at 1.9% for the 3Q (P). Although the GDP is ahead of forecast, it is below the previous result and a small number for the world’s largest economy. 

Yesterday, the U.S. released a sour CB Consumer Confidence report, at 125.9, versus the forecasted 128.0. Retail sales saw a decline -0.3% vs 0.3% growth. Average Hourly earnings eased 0%, Core Consumer Price Index dipped to 0.1% from 0.3%. The good news is that unemployment took an unexpected drop to 3.5% for the month of September, but the forecast, to be released on November 1st is 3.6%.  

As we already mentioned the 25-basis point rate cut to 1.75 is widely expected and also priced in. Investors are expecting a hawkish statement to accompany the easing which will be bullish for the USD. 

Switzerland released the KOF Leading Indicators Index, which is designed to predict the direction of the economy over the following six months. A bullish result was released at 94.7, ahead of forecast 93.9. As a result, CHF gained against the USD. On the 4H time frame, the pair stopped at the 200EMA which coincides with the top of the Ichimoku Cloud as support around 0.99186. Upbeat employment and GDP figures from the United States brought the price back up to around 0.99330. 

Resistance is around: R1 23.6% Fibo 0.99394, R2 0.99702, R3 0.99907

Support is around: S1 50% Fibo 0.99049, S2 61.8% Fibo 0.98894

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