A Look at USD Pairs Ahead of the FOMC Meeting This Week

A Look at USD Pairs Ahead of the FOMC Meeting This Week
December 15, 2014

We are now entering the second half of December in trading this week and the position of the US dollar is difficult to predict.

Wednesday should provide a great indicator  as the FOMC (Federal Open Market Committee) statement is due, and this is the last meeting for the Federal Reserve in 2014. Traders should watch out for the fed sending the markets signals about the US dollar in 2015. Also keep an eye open for any indicators of the next logical steps and timing for the fed to start raising the interest rates now that the US quantitative easing program has ended.

At this point in time it is a given sentiment through markets that the Fed will raise the rate somewhere in the 2015, with the only disagreement being on the timing: some say this will take place in Spring 2015, some predict this to be an event in Fall 2015 or even later. This is what the focus will be on Wednesday’s meeting.
 

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The words to focus on this statement are “considerable time”. If the statement includes these two words, it means that it is unlikely the Fed will hike anything until late 2015/early 2016. On the other hand, a removal of those two words, will signal a rate hike to come as early as next spring.

How will the US dollar react? In the first case it should be sold across the board, with the EURUSD and GBPUSD being the main beneficiaries, while the USDJPY should be supported by the equity markets, as a delay in hiking the rates is usually being viewed as bullish for stocks.

On the other hand, if the Fed removes the words, “considerable time” from their statement, then look for the US dollar to surge to higher values, but, be careful on EURUSD on dips as 1.2300 level seems to be a tough one to crack.

On the four hours chart the pair is forming a falling wedge that just broke the all important 2-4 trend line and while this is not a guarantee price will move higher, it is definitely a bullish sign in otherwise a bearish market for the pair.

Regardless of the outcome this Wednesday, binary options traders should note that the commodities currencies should move on their own as what is happening on the oil and gold markets seems to be far more important for market participants than a move from Fed that could be very well already priced in.

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Sammy

Sammy

Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world


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