The US data this morning came in better than expected which has softened the Fed expectations for tomorrow a bit, but it is still leaning toward 50 bps. The retail sales data today has GDP looking toward 3% for the 3Q. That is pretty good. The question is "Has inflation - and expectations for inflation - made the current rate environment too restrictive?"
The USDCHF at session lows today (prior to data) and also yesterday, stalled near a swing level at 0.84315. The subsequent rise - helped by the data this morning - has taken the price back toward a cluster of moving averages that have centered themselves near 0.8471 to 0.8483 (see blue and green lines on the chart below).
Those MA are all near each other because the price action since around August 21 has been largely up and down with most of the price action between 0.8399 and 0.8561 (3 weeks of trading). See the red box below.
With the Fed decision and the uncertainty, that move back to the cluster and using it as a barometer for bullish above and bearish below, makes sense. We know the Fed is to act. We don't know if it is 25 or 50 (I am leaning to 25 with a path toward more cuts explicitly stated due to too restrictive policy). That should give the dollar a boost - at least temporarily - but does it get out of the Red Box? Maybe not if it is a dovish 25 bp cut.
Having said that the door is open for a lot of options and with the dot plot and estimates for GDP, Unemployment and Inflation also released, the price action can be expected to be quite volatile as the market digests all the permutations. Technicals tend to come in play during these situations as the price action is the snapshot of the "markets" perception. So be aware and prepared. Conversely, take the day off and come back when the market might be more predictable or less risky.
