All eyes on FOMC and USDCHF looks cheap. One of the most dovish members of the FOMC has start to shake the market after her hawkish commentary yesterday. Brainard is known for her dovish cautious approach. Brainard, who is awaiting Senate confirmation to become Fed vice chair, said on Tuesday that the central bank “will continue tightening monetary policy methodically” and will start “to reduce the balance sheet at a rapid pace as soon as our May meeting.”
The QE honeypot seems to be almost empty at this point. To put it another way, Brainard’s remarks raise the stakes for the Fed’s next meeting minutes, which are due later on Today and are likely to provide information on the rate rises and so-called quantitative tightening, the process of reducing bond holdings, the Fed will be doing. Investors are dumping fixed-income securities as policy makers move to raise interest rates in the face of surging global inflation and tightening labor markets. Bonds worldwide are extending losses this week after completing an eight-month losing streak, the longest on record. All of this will lead to bullish mode of USD.
The USD/CHF & Dollar Index
We believe this pair is currently undervalued, and that the Fed’s increased tightening rhetoric will boost the USD, making this a good time to enter a long position. Looking at the technical, it’s now forming a descending wedge and the daily MA 200 is now acting as a very strong support after being tested several times. A clear break of this classic pattern would be a bullish confirmation toward the 1.0000 psychological level.
USD/CHF Month Chart
All eyes on FOMC. The current instability in government bonds markets means that today’s release of the minutes of the last Fed policy meeting will be scrutinized a lot more than usual–including a “compare and contrast” with what was said at the press conference that followed that FOMC meeting.
Technically bounce off D1 MA 200 resistance and pretty much expensive now, this could trigger the confirmation of bearish market after ‘unexpected’ bull for the last 3 weeks.