EUR/USD now trades at 1.3775, a few pips away from the close on Friday. The market expects Bernanke to announce significant monetary stimulus that will weaken the dollar.
But what happens if the FOMC doesn’t deliver? We might see a “buy the rumor sell the fact” movement.
The euro started the week with a big Sunday gap and remained depressed since then, trading in a narrow range on anticipation for the big announcement. Well, now the euro loses its patience.
Just before the announcement, Moody’s found the right time to cut the rating of major US banks. This is one of the reasons for the dollar’s fall, but it seems more like speculation that Bernanke will provide a Big Bang.
The FOMC will probably lay out a few measures, but isn’t likely to announce QE3.
resistance is at 1.3838, followed by 1.3950. Support is at 1.3750, followed by 1.37. For more on the euro, see the EUR/USD forecast.
Update: it seems that EUR/USD is hesitating at this spot, that serves as resistance. If the statement will be ambiguous, a battle around this line is likely, until the market fully digests the statement.
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