Profit Mongers @ 9:45 AM, Tuesday December 14 2010
Hey folks,
1415 FOMC Interest Rate Statement - There's no chance for a change in interest rates here, so the market is set to respond to the language of their statement including their economic outlook and any potential modifications to the QE2 package announced at the last meeting. With Bernanke expected to be very low key and stay the course at this meeting, instead of one key thing to zero in on and trade either way, it's more about looking out for any surprises. Here are the main things that have a shot of showing up and pushing the market:
--If they expand QE2 by any amount beyond their current 600B outlay, USD should weaken broadly, so EUR/USD should rally 40-70 pips.
--If they make any comments on problems associated with the US defecit or credit rating, that could reignite USD weakening sentiment and push EUR/USD higher by 40-70 pips.
--If their economic assessment is incredibly pessimistic, EUR/USD will likely whipsaw around but move generally higher, so I'd buy on dips.
--If their economic assessment is incredibly optimistic, USD should strengthen broadly, so EUR/USD should head lower by 40 pips.
As you see, I plan to trade EUR/USD on this one. As I type, we've seen the EUR/USD rally from early this week sputter out and pull back over 100 pips this morning. This seems to be a bit of position squaring which should set us up for news action in either direction this afternoon. If you check my EUR/USD trading thread, you'll see that I do not have confidence in this rally reversing the trend on EUR/USD long term, so from a long term perspective if we do rally hard off the data, I'd be looking to short into it to take advantage of a reversal lower tomorrow or later in the week.
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