Dollar Trading Mixed ahead of FOMC Meeting

The U.S. Dollar is trading lower against most majors except the Japanese Yen, as investors await this afternoon’s FOMC policy statement and tomorrow’s Bank of Japan monetary policy decision.

The U.S. Dollar is trading lower against most majors except the Japanese Yen, as investors await this afternoon’s FOMC policy statement and tomorrow’s Bank of Japan monetary policy decision.

The Fed is expected to leave interest rates unchanged at historically low levels and reiterate its stance that rates can remain low “for an extended period”. Based on recent economic reports, the Fed isn’t expected to make any significant changes at time. Nonetheless, the language of the statement will be closely watched for any significant changes.

In addition to maintaining a historically low interest rate, the Fed is likely to say that inflation is subdued and while the economy continues to improve, the employment situation is still a major concern. Traders will also be watching to see if there are any dissenters at this meeting. At the last meeting, Thomas Hoenig, president of the San Francisco Federal Reserve Bank broke rank with the other members and called for the Fed to soften the language of its statement.

On Wednesday, the Bank of Japan is expected to maintain its historically low overnight call rate at 0.1%. Members of the BoJ are expected to discuss adding additional liquidity-boosting measures to help revive the economy.

Overnight the EUR USD is trading inside of its recent range. The key issue driving this market is whether Greece will receive bailout money from Germany and France. Gann angle support at 1.3640 is underpinning the market at this time.

The GBP USD is trading a little better. The market is still trading inside of a retracement zone created by the weekly range of 1.3501 to 1.7042. This retracement zone is 1.4854 to 1.5271. The key fundamentals driving this market are political uncertainty, the poor economy and a soft monetary policy.

The USD JPY is trading better. Setting tomorrow’s BoJ meeting aside, this market will react to the direction of the stock market today. Increased demand for higher risk assets is likely to underpin this market. A breakout above downtrending Gann angle resistance at 90.83 will likely trigger an acceleration to the upside.

The USD CHF is trading lower because of the strength in the Euro. Yesterday’s closing price reversal bottom has been negated, putting this market on a path toward a major 50% level at 1.0513.

The desire for higher risk assets is helping to pressure the USD CAD. Based on the current chart formation and the downside momentum, investors should look for this market to continue down to parity or the July 15, 2008 low at 99.74.

Greater demand for higher risk assets and position squaring ahead of today’s Fed meeting are helping to boost the AUD USD and NZD USD. Strength appears to be building in the New Zealand Dollar which could mean a near-term challenge of .7124.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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