All Eyes on Today’s FOMC Statement

The euro saw gains against virtually all of its main currency rivals yesterday, following the release of a significantly better than expected German ZEW Economic Sentiment figure. Additionally, a positive Spanish bond auction led to an increase investor risk taking. Today, all eyes are likely to be on the US FOMC Statement, scheduled to be released at 17:30 GMT. Speculations that the Fed will announce an expansion of its bond buying program today have caused the US dollar to turn bearish in recent days. If the FOMC Statement includes such an announcement, the greenback could take additional losses as a result.

Forex Market Trends

Daily Trend up down up up up up
Weekly Trend up up up down up up
Resistance 1.3094 1.6216 83.68 0.9428 1.0633 0.8178
1.3047 1.6169 83.17 0.9380 1.0585 0.8135
1.3018 1.6138 82.86 0.9352 1.0556 0.8102
Support 1.2973 1.6088 82.37 0.9304 1.0509 0.8055
1.2944 1.6055 82.06 0.9276 1.0479 0.8026
1.2897 1.6007 81.55 0.9229 1.0433 0.7980

Economic News

USD – FOMC Statement May Lead to Further Dollar Losses

The US dollar extended its recent bearish trend yesterday, as the combination of “fiscal cliff” worries and speculations that the Fed will initiate a new round of monetary easing caused investors to sell the greenback. Against the Swiss franc, the dollar fell more than 40 pips during European trading, eventually reaching as low as 0.9317, before bouncing back to 0.9330 during the evening session. The AUD/USD shot up some 35 pips during mid-day trading before peaking at 1.0510. By the end of the European session, the pair was trading at the 1.0505 level.

Today, the main piece of economic news is likely to be the FOMC Statement, scheduled to take place at 17:30 GMT. Analysts are widely expecting the Fed to announce an expansion of its bond buying program, which if true, is likely to result in additional dollar losses during evening trading. Additionally, traders will also want to pay attention to the FOMC Economic Projections and Press Conference at 19:00 and 19:15. Any signs of economic expansion in the US from the FOMC may result in investor risk taking, which could send the safe-haven dollar even lower.

EUR – Euro Receives a Boost from German Data

The combination of a significantly better than expected German ZEW Economic Sentiment figure, and a positive Spanish bond auction helped give the euro a boost throughout European trading yesterday. The EUR/USD was able to gain close to 60 pips during mid-day trading, eventually trading as high as 1.2996, before dropping back to the 1.2980 level. Against the Japanese yen, the common-currency advanced more than 50 pips before reaching 107.20. By the beginning of the US session, the EUR/JPY was trading around the 106.90 level.

Today, the euro could see some volatility following the release of the EU Industrial Production figure at 10:00 GMT, with a better than expected result likely to lead to some risk taking in the marketplace. Additionally, the US FOMC Statement is likely to impact the euro as well as the US dollar. If an expansion of the Federal Reserve’s bond buying program is announced, higher-yielding assets, including the euro, are likely to see bullish movement as a result.

Gold – Gold Takes Minor Losses Ahead of Fed Announcement

The price of gold took minor losses during mid-day trading yesterday, as investors anxiously looked for signs regarding the Fed’s upcoming decision on whether to expand its bond-buying program. While the precious metal fell slightly more than $6 an ounce, eventually reaching $1708, analysts were quick to say that significant movements were unlikely to occur before today’s FOMC Statement.

Later in the week, gold traders will not want to forget to pay attention to the Eurogroup meetings, scheduled to take place on Thursday and Friday. Any positive announcements from the meetings regarding the pace of euro-zone economic growth could generate risk taking among investors, which is likely to benefit gold.

Crude Oil – US Inventories Figure Set to Impact Oil Prices Today

Signs of a decrease in global demand for crude oil caused prices to remain close to a one-month low throughout the European session yesterday. While the commodity was able to gain close to $0.50 a barrel during the first part of the day, eventually reaching as high as $86.29, a bearish correction virtually erased all of its gains. By the beginning of US trading, prices were stable at the $85.85 level.

Today, the US Crude Oil Inventories figure, set to be released at 15:30 GMT, is likely to have the biggest impact on oil prices. If the figure comes in below the forecasted -2.6M, it would likely be taken as a sign that demand in the US has gone up, which could help the commodity recoup some of its recent losses.

Technical News

The Bollinger Bands on the weekly chart are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, the MACD/OsMA on the same chart is close to forming a bearish cross, signaling that the price shift could be downward. Going short may be a wise choice for this pair.
Most long-term technical indicators show that this pair is range trading at the moment, making a definitive trend difficult to predict. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the near future.
The weekly chart’s Slow Stochastic has formed a bearish cross, signaling an impending downward correction. Furthermore, the same chart’s Williams Percent Range has crossed over into overbought territory. Opening short positions may be the wise choice for this pair.
While the Williams Percent Range on the daily chart has crossed over into overbought territory, most other long-term technical indicators show this pair range trading at this time. Taking a wait and see approach may be the preferred strategy at this time, as a clearer picture is likely to present itself in the near future.

The Wild Card

DAX 30
The Relative Strength Index on the daily chart has crossed over into overbought territory, indicating that a downward correction could take place in the near future. Furthermore, the Slow Stochastic on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of possible downward movement.

Written by