U.S. Dollar Mixed; Likely to Trade Rangebound

The Greenback is trading mixed this morning as investorsprepared for next week’s U.S. Federal Open Market Committee Meeting.

The Greenback is trading mixed this morning as investorsprepared for next week’s U.S. Federal Open Market Committee Meeting.

Next Tuesday and Wednesday the U.S. Federal Reserve meets toset its monetary policy. Traders expect the Fed to announce a second round ofquantitative easing. Strong speculation that the Fed will implement anotherasset buying program has been in the market since early August. Traders aren’tfocused on the event at this time as much as they are focused on the actuallyamount of money the central bank will pump into the economy.

For months traders have been driving the Dollar lower inanticipation that the Fed may inject as much as $1 trillion into the economy.Earlier this month Fed Chairman Bernanke confused traders by saying the Fed mayuse other monetary tools besides quantitative easing. This helped the Dollar tobottom as investors pared short positions.

This week began with the Wall Street Journal saying that theFed may only use a quarter of billion dollars instead of the trillion. Thisnews helped support the Dollar. Finally, on Thursday, a report surfaced thatthe Fed sent out a survey to dealers which suggested uncertainty about the QEplan while questioning the Fed’s credibility. Needless to say, the Greenbackgave back all of its gains from the previous day.

All of this news adds up to confusion and uncertainty a fewdays before the Fed meeting on November 2 and 3. Look for institutions and bigtraders to remain on the sidelines until the Fed announcement, thereby settingthe market up for a likely sideways trade.

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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