- Standard Chartered analysts
While the most traded currency pair is changing hands around 1.39 level, with bulls still aiming an important psychological level at 1.40, market sentiment has been strongly bearish during the last several months. At the moment of writing almost 70% of Dukascopy traders were selling the Euro versus the greenback, while American currency was bought in 65% of all cases across the board. This week, the buck has a great potential to regain some of the earlier made losses, since FOMC meeting is expected to provide additional boost to the Dollar as markets have priced in less aggressive tightening so far.
The two-day FOMC meeting is clearly the top highlight for this week, as it will be a significant challenge for Janet Yellen. Her comments coincides with an anticipated adjustment in the central bank's guidance related to short-term borrowing costs and withdrawal of its stimulus programme. More tapering is on the course, however, markets will keep an eye on any clues about raising interest rates as unemployment rate falls faster than expected. Many economists now believe the central bank will remove the threshold it set for considering a first rate hike, the same as the BoE did. In December 2012, Bernanke pledged to start raising interest rates as soon as unemployment falls to 6.5%, also assuming inflationary pressure will be tame. However, ditching the threshold can confuse market participants and cause a market turmoil.
© Dukascopy Bank SA