Since I'm already out of the Trader Contest without having any changes to get back in top 10 I just want to take the time and talk a little bit about the main event risk of the week: Fed Monetary Policy Statement Last time I have talk about this issues was 2 months ago and you can find my blog post here: Fed Taper Effect
Market expectation for this week's FOMC meeting has not changed as QE tapering is on an autopilot and we should expect another $10B taper. The focus will be more on the updated Summary of Economic Projections (SEP) which will give us further clues to the Fed officials rate projections.
With this another $10B cut it will bring the purchase peace down to $35B/month and as we go down the road of tapering we can see that the dollar has start getting more stronger (see Figure 1). If at the beginning of the tapering process we could see the dollar was stronger at beginning and than it reverse all previous gains(see Taper1, Taper2, Taper3) but it seems that since last taper the process is reversing in the sense that first the dollar is weakening that it gets stronger (see Taper 4).
Figure 1. EUR/USD Taper Effect.(Click on figure to enlarge)
It will all come down on how the Fed Chair Janet Yellen will play this card and her remarks on current US economic data. However if the past price action can serve us as a guide we should expect something like what was highlighted in Figure 1. There is a high probability that most of the Yellen's dovishness may be already price in the market and the upside EUR/USD movement should be limited.
Best Regards,
Daytrader21.
