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FOMC preview: Position for a hawkish outcome offers better reward - TDS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 15, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - Research Team at TDS, analyzed possible outcomes and market impact of the December FOMC meeting, that could be historic if the Federal Reserve raises rates.

    Key Quotes:

    “While many expect a ’dovish hike’ scenario at this week’s crucial FOMC, we think positioning for risks of a hawkish outcome offers better risk/reward.”

    “With upgrades expected to the economic outlook, any downward revision to the Committee’s “dots” are still likely to leave the Fed well ahead of market pricing on their expected policy path.

    “More generally, the ‘Divergence Trade’ is turning a corner and we see the end of this as a primary FX market driver on the horizon. With nearly all other G10 central banks now on hold, the USD needs to do more of its own heavy lifting to extend its uptrend from current levels.”

    “While the overall USD uptrend is now mature, the Fed should provide it with one last hurrah. Avoid USD/JPY as a vehicle to express overall bullishness. We prefer EURUSD shorts. USDCAD may lurch lower if the Fed underwhelms.”

    “We expect EURUSD to drop in the aftermath of this week’s FOMC meeting toward our Q1-16 forecast of 1.03 as its post-ECB rebound has clearly eclipsed levels justified by rate spreads.”
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