Tuesday August 10, 2010 - 20:14:25 GMT
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Forex Hound - www.forexhound.com
U.S. Dollar Hits Highest Level This Month Ahead of Fed Decision
Profit-taking and position squaring ahead
of this afternoonâ€™s Federal Open Market Committee decision is helping to drive
the U.S. Dollar to its highest level this month. There is still uncertainty
regarding how the Fed will act later today. Some investors are looking for a
clear decision to renew quantitative easing. Others believe that the Fed will
only change the language in its statement acknowledging the economy is slowing
The Fed is walking a thin line with todayâ€™s
decision. It has to be careful not to spook the markets by acting too hastily.
Furthermore, it must act with clarity and conviction in order to instill
confidence in the markets that it is on the right path.
The Euro changed its main trend to down
this morning on the daily chart when it crossed the last swing bottom at
1.3119. If pessimism prevails after the Fed decision and investors continue to
shed risky assets, then look for the start of a serious correction to a major
50% price level at 1.2605.
The British Pound also changed its daily
trend to down when it broke a swing bottom at 1.5819. After finding resistance
at a .618 price level at 1.5967, it is possible it may try to establish
short-term support at the 50% level at 1.5635. If this area fails, then look
for a move to 1.5400. Traders turned
negative on the Sterling
following a drop in home prices. With this leading indicator turning bearish,
traders fear that the start of planned spending cuts and the implementation of
new taxes may have a negative effect on the economy.
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