The most important event on the economic calendar in coming days is the policy meeting of American central bank. On Wednesday, Ben Bernanke will chair its last meeting of the FED and most analysts expect the bank to continue tapering of its purchase program. It will be interesting to see if weaker than projected job creation last month has any effect on the decision. As things stand now, markets expect another 10 billion drop in monthly buying of US Treasuries and mortgage bonds. Many have predicted the USD to benefit from the taper, but so far, it is only apparent in relation to commodity currencies. Not quite the broad rally, at least not yet. Another release sure to impact the Dollar will be the GDP data. On annualized bases, we should see growth of 3.4%. Anything below this level will be seen as negative.
The Japanese Yen gained some strength recently, pulling many of its pairs down. Some, like the GBP-JPY are lagging, meaning they have not sold off as much as others. The intermediate term chart looks ready for more downside, as long as it breaks the support of 168.30. In the perfect world, I would like to see a rebound here, do not care by how much as long as the shows clearly defined new minor low. If this happens, I will place a new sell order just below that level, looking for at least 300 pips move down. In addition, if the GBP-JPY rebounds to about 171, I will also treat that area as possible sell opportunity.
The AUD-NZD could be at important point. Following prolonged selloff, it has been testing the 1.05 support for several days, only to fail on Friday. Its daily chart reveals a large doji, as if the sentiment was about to change. For now, I am not looking for a long-term reversal, but a strong bounce is likely. Risks here are small, so I will buy this pair at the open, targeting about 150 pips. In addition, opening gaps in all currencies are possible, which would present new trading opportunities. Have a great trading week!
Mike K.