Wednesday could prove important for currencies and all financial markets for that matter. Federal Reserve will conclude its policy meeting and it is the key event of this week. Analysts and traders want to know if and when the central bank will slow down or even stop its easing policy. The stimulus program has been in place since 2008 pumping lots of liquidity into the financial system, but eventually it has to end. Many expect to learn today when that will happen. At least, the FED is likely to provide “guidance”, which will simply make speculation a little more focused. Personally, I doubt anything concrete will see the light of day. It would not surprise me at all if the statement read “No taper, no guidance, wait till first meeting of next year”. Just to make Christmas merrier for everybody and keep the suspense going.
I do not think it is a good idea to enter new Dollar trades going into the FED statement day. Still have the USD-CHF position from late last week, but since it was based on daily chart, I am going to let it ride for now. In the last post, I mentioned a short in the EUR-CAD and here is what I had in mind. The price closed sharply lower on Friday, possibly starting a larger pullback. Possibly, because to date we have no confirmation. Bearish pressure will only be confirmed with a move below Friday’s low and it has not happened yet. Still, I have a sell order in place with entry at 1.4525, targeting about 100 pips. This order will remain valid unless the EUR-CAD makes a new high, at 1.4665. Meanwhile, let us see what the FED has to say and how currencies respond.
Mike K.