The slow trading that has guided the majors so far this week should come to an end on Wednesday with the release of the FOMC minutes. Followed on Thursday by the ECB and BOE rate decision. The FOMC minutes have the possibility of adding a kick to the markets. Just last week Bernanke suggested that the Fed still has ,”A range of Possibilities”, at is disposal. These possibilities range from purchasing of treasuries or mortgage backed securities. Using the Discount window for lending possibilities. all the way to extending the language in the communication extending forward rates.
I would expect the FOMC to limit its action head of the ECB decision on Thursday. The FOMC also just extended operation twist after its last meeting. Heading into Asian and European trading Wednesday I would expect most of the majors to remain range bound. Any move up towards channel support or resistance in the USDCAD or AUDUSD could be used as scalping opportunities. The key is to focus on the data and extrapolate from the facts not hope. As always every keep your trades KEANE and play it safe.
EURUSD FOMC ON THE WAY
The EURUSD continued to play in a tight range between 1.2330 and 1.2220. A break below 1.220 could lead to a move towards 1.2180. A break of 1.2330 could lead to a push up towards 1.24. Ahead of Wednesdays FOMC meeting consolidation could be the plan of action. If the FOMC stands aside and waits for the ECB and BOE on Thursday the cross could lose ground to the dollar in the short-term. I would expect any dips to be bought ahead of the ECB.
GBPUSD FOMC AND ECB PLAN
A head and shoulders pattern screams of the 4hr chart. The problem is that a technical pattern can not predict the outcome of data flow that begins with the FOMC on Wednesday. If the pair does break lower the head and shoulders pattern could be used to find a price target on a short. But following the setup now would be an excuse for not thinking ahead of the FOMC, ECB, BOE and Non Farm Payroll.
Heading into the FOMC report the pair is still ranging between the .50 and .382 fibs from the May lows. The 50 fib is acting as resistance at 1.5782 and the .382 fib at 1.5660 is earning it keep as support. A break of either of these level could lead to a measured move. If the FOMC and ECB remain on the sidelines this week the cross could push back towards last Thursdays support at 1.5460. If the ECB delivers on its promise to add liquidity the pair could make a run to the 1.59 area. In the mean time all there is to do is watch the head and shoulders pattern and think of the possibilities.
Bouncing At Support
The AUDUSD is trying to bounce of the ascending trend line that creates the top of the channel the pair has followed higher. A pullback to support at 1.0450 could find buyers ahead of the FOMC and ECB announcements. Post data, depending on the outcome, the cross could break above the top of the channel and make a run towards the resistance at 1.0630. If the data disappoints the pair could test the bottom of the channel around 1.0280.
USDCAD PARITY IS KEY
The USDCAD similar to the AUDUSD is testing the extremes of its channel. The USDCAD has strong support at parity created by the descending trend line channel support and psychological support at parity. Any move towards this level should find buyers ahead of the FOMC. The first level of resistance rest at 1.0050. If parity is broken following FOMC support can be found at .9950 and .9920.