USD PRICE ACTION TURNS TO JULY FED MEETING
- The US Dollar is primed for volatility and will likely be sparked by Wednesday’s July Fed meeting
- EURUSD[1] and USDJPY[2] 1-week implied volatility readings, although muted, suggest a looming breakout from technical confluence
- Register for live webinar coverage of the July Fed Rate Decision hosted by DailyFX Chief Currency Strategist John Kicklighter [3]
The US Dollar looks to take the spotlight as currency traders anxiously await the outcome of the July Fed meeting slated for release Wednesday at 18:00 GMT. A reduction in the federal funds rate has been long priced in, but the size of the expected Fed rate cut remains ambiguous. As such, the July Fed meeting poses a major threat to the US Dollar and stands to spark currency volatility.[4][5]
US DOLLAR 1-WEEK IMPLIED VOLATILITY & TRADING RANGE CHART
Interestingly, USD[6] implied volatility measures appear relatively suppressed given the high-impact event risk surrounding the FOMC[7] rate decision. Looking at tenors further out, however, we see that the implied volatility curve is inverted for the major USD pairs and indicates that currency option traders are placing greater emphasizing on the near-term. That said, a major move in USD tomorrow following the Federal Reserve’s updated monetary policy stance risks sparking volatility across the currency market. [8]
US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (OCTOBER 29, 2018 TO JULY 30, 2019)
A violent repricing in lofty Fed rate cut bets (which currently stand at around 75 basis points of easing by year-end) could serve as the catalyst – particularly if Chair Powell communicates a firm outlook and conveys that the move to lower rates at the July Fed
