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It's that time again when all eyes will be on FED and US economic data as today we have two important figures scheduled to be release. Not only that we have the FOMC decision as main risk event on top of that we also have the US GDP figures and US employment figures. 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 $25B/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 and Taper 5).
Figure 1. EUR/USD Tapering Effect Than and Now.
Top picture in Figure 1 you can see the chart I've posted more than a month ago and with the "Tapering effect projection" and on the bottom the updated chart. You can check out my previous blog post on this issue here: EUR/USD Tapering Effect
Don't forget that we're not going to have any press conference from Fed chairman Yellen so it may be the case that a bigger role in setting the market tone and direction for the day would be the US GDP figures and employment data as we already saw that as we have moved down the road with tapering market reaction is less and less significant. After the Q1 GDP contraction market is expecting a rebound from -2.9% up to 3% but in my humble opinion after recent economic data I think this is a little bit optimistic but we'll have to wait and see for the actual release.
Best Regards,
Daytrader21.
