Medium term
Trade view / 21 November 2016 at 16:00 GMT

Fed rate decision: Market confidence in Yellen wanes

APAC Sales Trading Desk / Saxo Capital Markets
Singapore
Instrument: USDCHF
Price target:
Market price:

Background

The negative risk scenario will emerge if the market loses confidence in Janet Yellen's Federal Reserve and would look similar in price action and volatility terms to the moves post Bank of Japan earlier in 2016.

The initial knee-jerk reaction of positive risk sentiment in the wake of no hike should be sold into as the market digests the fact that the Fed can no longer pump up risk assets and completely loses faith in its ability to temper any market selloffs. 

Here, safe haven trades such as the CHF would perform and the USD would come under intense selling pressure against its G3-10 peers. Consequently selling the Dollar Index CFD makes sense.

Parameters


- DXY lower, Sell USDINDEX at market target 95 or below.
- Buy 2 month USDCHF PUT strike 0.94
xxx

 








USDCHF five-year chart

k Source: SaxoTraderGO

Editor's note: Please look at our dedicated rate-hike page for other scenarios that could result from the December meeting of the Federal Open Market Committee.


— Edited by Adam Courtenay

Non-independent investment research disclaimer applies. Read more

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