Posted: 20 Sep 2010 11:00 PM PDT

The Federal Open Market Committee (FOMC) is likely to repeat its previous statement and not provide any exciting news, as it did last time. Nevertheless, choppy trading will follow this release. FOMC Preview.

Last month’s dramatic decision

The previous FOMC meeting provided lots of action. The committee, lead by Ben Bernanke, decided to renew the Quantitative Easing steps. Up to this meeting, bonds that matured were absorbed by the central bank – the balance sheet squeezed. From that meeting onwards, the Federal Reserve would reuse the mone and buy government bonds.

The initial reaction was a weaker dollar, as printing more dollars meant less value. But after many hours, the trend changed – the notion that the economic situation in the US is dire sent traders to buy the dollar – risk aversive trading. The statement included a clause about the economic recovery being more modest than expected.

Pause in drama

This FOMC meeting will probably be far less dramatic than the previous one – no significant changes in policy are due.

Ben Bernanke is likely to continue the pledge to support the economic recovery continuing the bond buying scheme, keeping the balance sheet stable.

Recent figures have been OK – not really good, but not disastrous as in August. Non-Farm Payrolls were better than expected, weekly jobless claims are on the fall, retail sales improved and more indicators could have been worse.

So, this supports a pause this time. I don’t see a high chance of more extreme measures such as raising inflation targets, an idea that Bernanke raised in Jackson Hole but took off the table quickly.

Extended period of time

Regarding the Federal Funds rate, there’s a huge consensus that it will remain at a maximal level of 0.25%, and that the wording about future moves won’t change – the rate will remain at low levels “for an extended period of time”.

Bernanke can always surprise and introduce more extreme measures such as additional quantitative easing steps. Goldman Sachs suggested that a new scheme, in a scale of one trillion dollars will be introduced in November. This depends on data that will be accumulated till then. In the meantime, the “wait and see” scenario is of higher probability, at least for this decision.

I think we will see choppy trading in the hours around the meeting but no long term effect.

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Forex Daily Outlook – September 21 2010

Posted: 20 Sep 2010 03:00 PM PDT

Some interesting highlights coming up today, in the US Federal Funds Rate and FOMC Statement are just some of the news, Monetary Policy Meeting Minutes in Australia and more. Let’s see what awaits us today.

In the US, Federal Open Market Committee (FOMC) that is Scheduled 8 times per year and it’s the primary tool the FOMC uses to communicate with investors about monetary policy. It contains the outcome of their vote on interest rates and other policy measures, along with commentary about the economic conditions that influenced their votes. Most importantly, it discusses the economic outlook and offers clues on the outcome of future votes;

Later in the US, Building Permits an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building, has stabilized on 0.56 M and measures the Annualized number of new residential building permits issued during the previous month.

More in the US, Federal Funds Rate the Interest rate at which banks lend balances held at the Federal Reserve to other banks overnight; Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future;

Finally in the US, Housing Starts, Annualized number of new residential buildings that began construction during the previous month and While this is monthly data; it’s reported in an annualized format (monthly figure x12). This data is slightly overshadowed by Building Permits because they are tightly correlated and a permit must be issued before a house can begin construction.

In Canada, Core Consumer Price Index (CPI), the price of goods and services purchased by consumers, excluding the 8 most volatile items increased by 3% and account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate. While the Consumer Price Index (CPI), the price of goods and services purchased by consumers decreased by 5%.

For more on USD/CAD, read the Canadian dollar forecast.

In Great Britain, Public Sector Net Borrowing, a monthly data that measures the value difference between spending and income for public corporations, the central government, and local governments during the previous month; increased by 9 B indicates a budget deficit.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, Trade Balance the value between imported and exported goods during the reported month, decreased by 1.08 B but still but still indicates that more goods were exported than imported, since Export demand and currency demand are directly linked

In Australia, Monetary Policy Meeting Minutes, released 11 times per year, 2 weeks after the Cash Rate is announced and It’s a detailed record of the RBA Reserve Bank Board’s most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates;

For more on the Aussie, read the AUD/USD forecast.

In New Zealand, Current Account It’s directly linked to currency demand – a rising surplus indicates that foreigners are buying more of the domestic currency to execute transactions in the country has decreased by 0.03 B and this is among the few non-seasonally adjusted numbers reported on the calendar, as it’s the data most commonly reported.

That’s it for today. Happy forex trading!

Bernanke, Guarded Yen and More in the Forex Video Outlook

Posted: 20 Sep 2010 10:57 AM PDT

In the weekly forex interview on Forex TV, I spoke with Julie Sinha about the non-expectations from the FOMC meeting, the technical levels of USD/JPY that the BOJ monitors, despite the holidays in Japan, pairs to watch this week and more. Enjoy:

I’ve already beforehand that the yen intervention has a good chance of succeeding. The Bank of Japan follows up closely on the exchange rate of USD/JPY also in the aftermath of the big initial move, and despite holidays in Japan on Monday and Thursday. This week is also very interesting with EUR/USD, as the pair is just under a major technical barrier, and the Irish problems are far from over.

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Forex technikal and fundamental analysis

Sep 21, 2010

Forex Crunch Fireworks Will Probably Wait Till November – FOMC Preview

Forex Crunch Fireworks Will Probably Wait Till November – FOMC Preview

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