Today, the central event will be the final decision of the Fed regarding monetary policy, which may have a local positive effect on the dollar.
Recently, the dynamics of the US dollar has been fully associated, on the one hand, with the success of trade negotiations between Washington and Beijing, and on the other, with the Fed's view of the future of monetary policy. This state of affairs was fixed, approximately, in the summer of this year, when the American regulator decided to associate its monetary policy with the situation in the American economy and the result of the US-Chinese negotiation process on trade.
Today, it is assumed that the Fed will leave the key interest rate unchanged at around 1.75% and, expressing general concerns about the uncertainty of the outcome of trade negotiations, will be generally optimistic about the growth of the national economy. This will be already enough for the dollar to receive support, which can only be strengthened by the positive data on consumer inflation that will be released today if, of course, they are higher than expected.
Markets will also expect the regulator's traditional forecasts for the end of this year on GDP, employment, interest rates and inflation for the next 2020. If it is possible to predict the likely behavior of the dollar today, summarizing all the presented expectations of the Fed on important macroeconomic indicators, it can be said with high probability that their positive component, and such a probability exists, can become the basis for the appreciation of the dollar.
Now, we consider the factors that may restrain its long upward dynamics. First of all, this, of course, is the topic of US-Chinese trade negotiations, which, by its uncertainty of the result, has already exhausted investors and have a negative impact on the dynamics of the yield on treasuries, and through them on the movement of the dollar. Another reason is speculative hopes that the ECB will not follow the path of super-soft monetary policy, which could hold back the weakening desire of other world Central Banks to also lower interest rates. In this regard, an increase in rates on these currencies, including the euro, will support their rates in pairs with the dollar.
However, in our opinion, there are no such reasons yet, since the ECB will most likely support the monetary rate adopted earlier by M. Draghi during tomorrow's meeting, which could lead to the euro turning down against major currencies.
Forecast of the day:
The EUR/USD pair is turning down before the Fed's monetary policy meeting. We consider it possible to sell the pair after its decline below the level of 1.1085 with its likely decline to 1.1050, and then to 1.0990 as a result of the ECB meeting.
Our forecast for spot gold remains the same. We consider it possible to sell it after the price drops below 1460.00 with targets at 1452.45 and 1439.00.