The publication of the latest minutes of Fed's meeting is the last significant event of the week. The market will assess the mood of the regulator's members regarding the prospects for monetary policy in 2018.
A surge in trading activity is expected to continue tomorrow and last this week. After this, traders will trade in a "thin market" against the backdrop of Thanksgiving and "Black Friday". A traditional low liquidity can provoke impulse volatility which is sometimes completely unpredictable. In a period of such uncertainty, it is not advised to trade although tomorrow's events are still quite predictable, especially when it comes to the USD/CHF pair.
The Swiss franc pair is blindly following the US dollar at the moment. The hopes for an "internal" drivers of the Swiss currency collapsed after the annual meeting of the head of the Swiss National Bank (SNB) Thomas Jordan with members of the government. The opinions voiced during the meeting confirmed the fact that the policy of the regulator will remain the same in the foreseeable future. .
Despite the substantial weakening of the franc against the euro and an increase by more than 700 points up to 16 figures, the Swiss currency is still considered overvalued. Nevertheless, the head of the Swiss Central Bank said that negative rates "are still relevant" and conducts currency interventions. In other words, the SNB maintains its policy without indicating any time horizons.
The market has long been accustomed to such conditions, and even more so to such rhetoric. Hence, traders actually ignored the words of Thomas Jordan, focusing on American and European events. In my opinion, the SNB can affect the dynamics of the franc only if it announces further easing of the monetary policy. In other cases, such statements will be associated with "news noise".
Thus, the movement of the USD/CHF pair will depend on the behavior of the dollar and on the external fundamental background (geopolitical risks) in the near future. This suggests that tomorrow's release of data on orders for long-term goods. Particularly, the FRS protocol will determine the vector of the USD/CHF pair.
Here, it is worth recalling that the market has set the current prices with 100 percent probability of a December rate hike. Therefore, any doubts of the regulator in this regard will be very acutely perceived by the market. However, such indecision is rather unlikely.
Yet, further plans of the Federal Reserve are not completely clear. On one hand, most of the regulator's members publicly support the continuation of the course on normalizing the monetary policy. On the other hand, a weak growth in inflation and a decrease in the growth rates of average wages can change the tone of Fed officials. Jerome Powell, who will lead the Fed in February 2018, continues to take a cautious and indistinct position on this matter. In his speeches, he increasingly draws attention to inflationary trends, and recently proposed to abandon the practice of median forecasts, preferring a consensus forecast by the formula "if something."
As a rule for the rest of the Fed members, they have to take a clear position on the December increase and talk very vaguely about the prospects for 2018. In particular, Patrick Harker, who is considered a "hawk", recently said that next year everything will depend on inflation. A similar opinion is shared by Robert Kaplan. It should also be noted that the position of some members of the regulator has no "practical significance" which is about Dudley and Yellen, who will lay down their plans next year. The Fed head said yesterday that it will not remain on the Board of Governors. In addition, Stanley Fischer also left his post earlier. Thus, the new members of the Federal Reserve can bring their own vision of the situation and influence the general resolve of the Fed.
In other words, tomorrow's FRS protocol is unlikely to clarify the situation regarding the prospects for 2018. However, the dollar will be under pressure if the current members of the regulator again put inflation at the head of the corner.
For the USD/CHF pair, this means that the price will fall to the nearest support level of 0.9865 which is the bottom line of the Bollinger Bands indicator on D1. Below this target, the pair will most likely not go away unless there is an unexpected too "soft" rhetoric of the regulator, especially if it comes from Jerome Powell.
In the technical point of view, the situation is uncertain. On the daily chart, the pair is located on the middle line of the indicator Bollinger Bands and Kumo cloud below the price. Bulls need to gain a foothold above 0.9960 to form a bullish Ichimoku Kinko Hyo indicator which will open the possibility to move at a parity level and at 1.0035 mark. However, it is necessary to take into account the fact that the November meeting is held before the release of key data on US inflation. Therefore, the market will assess the resolve of the regulator's members through the clarity of this fact.
