Here we go again with new “insane” levels against the dollar across the board and taper is right behind the corner to give us a trade of the lifetime. Or is it? While many planning their big long dollar of the lifetime, market movers already in their big short of their own record.

Let’s take a look to what happened trough out the year. The first wave of taper expectations started to gather momentum in June, but with unexpected Bernanke’s assurance “for foreseeable future” EUR/USD printed a record 400 pip daily candle and kept going until September. Then again – just a bit of profit taking and all the fuss in the financial media about not “if”, but “how much” taper will be announced. That day Gold had some buying right in to the moment of announcement – very suspicious developments if you believe that all market participants got “the news” at the same time.

And now – again… Couple of marginally better numbers and speculations began. Let’s face it – employment data is nowhere close to pre 2008 levels and recent two NFP prints is just a non-event, compared to constant 300-400k add-ups in older days.. But, is employment or any other macro data have any importance for the FED at all when it comes to unprecedented QEasing of all times?

Interest of the Public vs Elite/Business interest. They always declaring public interest, but acting on behalf of the elite/business. Politicians use term Democracy when in reality it is Corpocracy. So the FED, they claiming that whole thing is for the economy, but in reality it’s all about markets and their market moving thug friends.

Close circle. It’s naive to think, that central banks do not communicate “behind closed doors” with the major banks. That’s a close circle and they help each other. Central bank needs support/understanding from bankers to buy junk government debt with “reasonable” rates and in exchange – central bank gives some nice trade opportunities, which comes up of policy changes of a central bank (rate decisions and etc.).

And the FED… A central bank with private shareholders! Somewhat this fact gets understated in the context of all the talks about crisis, FED, QE’s and expectations in the financial media.

Stock market technicals are the most important. If it’s all about the markets and if major banks know in advance about FED’s decisions, it would be logical to assume, that the main aspect that FED considers as a trigger for taper is technical developments in the markets and especially - S&P500 index. When stocks will reach significant enough highs, that taper induced corrections won’t break the trend in one swing, than it will be the time. I have 1850-1880’s area as most probable turning point of a current S&P500 trend and until then I would be very skeptical about QEnding prospects.

Test and confirmation. The most basic price action behavior at the level – with test and retest, followed by breakout or rejection represents the fundamentals of human psychology and dynamics of liquidity. Maybe same principle could be applied for FED’s taper schedule and its impact on the markets. First taper should be small/symbolic (a test) which will produce strong knee-jerk reaction. But considering, that remaining monthly injections – 60/70 billions will still be an enormous amount and that pace could be maintained for next 6-8 months, probably means that market trends will continue. Second taper announcement – no matter how much, should mark an essential turning point in the “QEternity” - a confirmation (retest) about FEDs policy change for good. Of course, market movers will start way before the second announcement of the taper. And again - clues should be looked in the technicals of the markets.

At some point, tapering will be announced and maybe even this week, but it doesn’t mean that we won’t get prolonged periods of further easing and inevitably shattered expectations for more taper in the future.

So, taper or no taper – expect the unexpected. Despite all the opinions and analysis in the financial media, one must understand, that for an outsider it’s always – 50/50 probability for FED to taper or not at every FOMC meeting. First announcement of the tapper is intentionally over-escalated and may end up with another bull swing in the markets. Financial media and politics will tout about FED’s success as even taper didn’t stopped the rise of the markets (aka economy ). But sooner or later – deep correction will come. Probably somewhere in between first and second taper.

Technical scenarios for FX majors. Euro and Pound seems preparing for another leg up, but at the same tame they could drop at any point of current range as they have risen so high since September. Gold and Aussie sits at the bottom of their respective ranges and ready to continue monthly/quarterly bullish correction, but at the same time – another leg lower before bullish continuation wouldn’t hurt as better price with additional liquidity will be good enough reason for market movers to long later.
Yen have plenty of room to go both sides, but bearish correction is long overdue – either inside recent weekly swing up or maybe even deeper in to the yearly range.

Here are projections for major currency pairs in regards of December’s taper decision – general directions and essential hesitation/rejection areas:

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