Preparing for the publication of important statistics
On February 27, 2018, the new head of the Fed Jerome Powell presented the monetary policy report to the US Congress. Will the rate hikes and the US dollar strengthening continue? In this review, we suggest considering the USDCHF chart on which the strengthening of the US dollar against the Swiss franc looks like growth.
Jerome Powell did not exclude the likelihood of a rate hike this year. Previously, the Fed representatives announced that there could be threefold rate hikes. The current Fed Funds Target Rate is 1.5% with the annual inflation of 1.8%. Its next increase is expected at the next meeting of the US regulator, which will be held on March 21, 2018. The Swiss National Bank rate is negative and amounts to minus 0.75% with the annual inflation of 0.7%. Its next meeting will be held on March 15, 2018, but no rate hike is expected. Theoretically, such a difference in the rates may trigger an increase in USDCHF. The dynamics of the franc may be affected by important economic statistics. On March 1, the GDP for the Q4 of the last year and on March 6, the February inflation will be published in Switzerland. On March 1, the Core personal consumption expenditure for January will be released in the US. The Fed takes it into consideration when making decisions on rate changes. Preliminary forecasts are neutral. If they do not coincide with the real figures, then there is a possibility for a noticeable movement of USDCHF.
On the daily timeframe, USDCHF: D1 updated the 2.5-year low and currently is trying to rise to the upper boundary of the 3-year neutral range. The further price increase is possible in case of the publication of negative economic data in Switzerland and positive ones in the US.
- The Parabolic indicator gives a bullish signal.
- The Bollinger bands have narrowed, which means lower volatility. They are tilted up.
- The RSI indicator is above 50. It has formed a positive divergence.
- The MACD indicator gives a bullish signal.
The bullish momentum may develop in case USDCHF exceeds the last fractal high at 0.942. This level may serve as an entry point. The initial stop loss may be placed below the last fractal low, the low for 2 years and 7 months, the lower Bollinger band and the Parabolic signal at 0.918. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 0.918 without reaching the order at 0.942, we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
|Buy stop||above 0,942|
|Stop loss||below 0,918|
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