EUR/USD is trading around the round number of 1.29 ahead of the highly anticipated decision by the Federal Reserve.
Expectations for dollar printing are high, but the pair is hesitating. Looking at the hourly chart, we can see a nice uptrend support line. EUR/USD is now flirting with this line, as you can observe on the chart:
1.29 is now a pivotal line. The really strong resistance is the even more round number of 1.30. It is followed by 1.3060. Looking down, we have 1.2815 and 1.2740.
Markets are very tense towards the decision: many expect an open ended QE program that will be determined on a meeting by meeting basis. Such a decision will send the dollar down against most currencies. The yen could be an exception, as it already made huge gains and could suffer an intervention.
Also a fixed size QE program (like QE2) would likely result in the same dollar drop. EUR/USD would likely challenge 1.30 in no-time.
However, the Fed might disappoint by only extending the low interest rates pledge to 2015. Such a reaction would send the dollar soaring, with EUR/USD tumbling down rapidly. A softer disappointment would be to state that QE3 is on the way until the end of the year, but not now.
QE3 is priced for now, so this would still be disappointing.
For more, see the preview: QE3 Now? Really?Get the 5 most predictable currency pairs