FOMC & Dollar Strength

The Dollar has created some support off of the November 10th low. Some encouragment for swing longs. But there is a scenario I could see play out today that could change the diretion for the week if the Dollar buyers are not really committed.
Perhaps the dollar move up was just a product of the pound weakness. Maybe we will see some dollar selling after the morning data reaction going into the FOMC more selling after a slightly more dovish FOMC statement.

Will be interesting to see how it plays out today with stack of strong data coming on thursday.

Another thing technical to consider is that while the Franc and the euro dollar crosses dollar bear channel has weakened and shows some potential bottoming behavior , neither has broken out of their respective channels yet leaving us right on the border. It is kind of a pivot area. I still find it hard to imagine that today will move to awful hard with thursdays substantial data lurking.

An interesting day for sure.

There is a report that due to bad data yesterday (ie PPI and Retail Sales) there is a growing sentiment that the FED may consider once again to ease early next year the sentiment is 8% as of today....

What are we expecting from FOMC ?

any idea?

IFR has rumors of a hawkish report. Given the USD is sitting around the highs of the session I think the rumor has been accepted by the market. Best opportunity today is for USD weakness on a benign>weak report.

are we talking about USD weaken ?

The rumors of a hawkish report were definately confirmed by the price action today. That still doesn't mean the market is correct in it's assumption...just that they reacted to their believe.

As with all fundamentals, the effect is likely to be short lived-or the effect tends to live only as long as pricing action begins towards the next fundamental. If the tone is hawkish and the market starts buying into the core CPI consensus (which keeps inflation above the Fed's target) the $ will definately strengthen further.

The core PPI was way down:

<TABLE class=tborder style="MARGIN-TOP: 12px" cellSpacing=0 cellPadding=3 width="100%" align=center border=0><THEAD><TR><TD class=alt1 noWrap></TD><TD class=alt1>8:30am </TD><TD class=alt1 align=middle>USD</TD><TD class=alt1>Core PPI m/m</TD><TD class=alt1 align=middle>http://www.forexfactory.com/forexfor...isc/mi_med.gif</TD><TD class=alt1 align=middle>-0.9%</TD><TD class=alt1 align=middle>0.2%</TD><TD class=alt1 align=middle>0.6%</TD></TR></THEAD><TBODY></TBODY></TABLE>


Could we see the same thing in the core CPI? Is it possible the market may start to buy into this possibility of a similar number? Sure. The best clue will be given during the London trading session tom.

As with all fundamentals, the effect is likely to be short lived-or the effect tends to live only as long as pricing action begins towards the next fundamental. If the tone is hawkish and the market starts buying into the core CPI consensus (which keeps inflation above the Fed's target) the $ will definately strengthen further.



sorry, can you more explain why usd will further strengten.
thx

No Prob. Currencies get stronger as the possibility of interest rate increases grows. Hawkish means the Fed is biased towards a rate increase. If the core CPI comes out at .2, that will keep the yearly number at about 2.9, which is above the Feds target inflation rate and would make an interest rate rise more likely. The $ would strengthen on that.

ok thx, but how if fed decision is not to increase the rate. ( i mean if they just let the inflation 0n 2.9 and just watch and do nothing) or they comment " is still under 3 no worry " thx anyway.

not to throw a monkey wrench into the works but today's FOMC is from the meeting from previously. We already know what the FED did. I don't think today's PPI is going to have much impact.


I predict, and this is just me, not any analysis here, once the report hits, the GDP will jump up THEN go back down. The over all trend is down anyways. So I feel fairly secure in my opinion.

I have been discussing this a lot over the last few hours

inflation is a worry, but the jobs numbers are giving a clouded picture because of seasonal workers, and baby boomers retiring

the fed is concerned about a house price driven crash so would be more likely to anounce a pause, but no cut, not yet

production cpi ppi is more likely to rise in the run up to the holiday season, well certainly true in the uk

finally the gbp/usd and eur/usd are either at a peak or starting a downward trend, so the upside of the announcement will be limited

tomorrows data also suggests a strengthening of the dollar.... me thinks

either expect a large , or whipsaw

bah

sold with +6 pips profit

it was on +15pips, x3 lots.

heres the minutes...

http://www.federalreserve.gov/fomc/minutes/20061025.htm

good god! LOL

spot on

well done me!

i didnt trade, the movement wasnt there, and could still go either way

i would have waited until the eur/usd was over 1.2850 before i sold, aint getting into a grid lock between fundys and techys.. thats just too much of a gamble

Didn't Traded it !

Best decision MaXey.

I did get hit for -15...bad decision...should have stood aside. These minutes can be bad and unreliable...too much information to digest.

DC