The U.S. Dollar strengthened late Thursday follows better than expected U.S. economic reports which showed the economy was stabilizing and beginning to show signs of bottoming.

The lackluster trade in the Forex markets continued throughout the day with no real movement in either direction. Today's action is best described as two-sided. This is most likely because of the mix of the news recently. Most major Forex pairs for the most part have reached short-term retracement areas which have more or less neutralized them.

Overnight a pair of central banks announced no changes in their interest rate policies. The Bank of England left rates alone while calling for the economy to be sluggish while it attempts to recover.

The Swiss National Bank also left interest rates alone but reemphasized that it will take firm action if the Swiss Franc appreciates too much against the Euro. The SNB's biggest fear is deflation.

With nowhere to go with interest rates and quantitative easing and additional stimulus on hold while the global economies begin to recover from the recession, what central banks say is going to take on more weight than actual action. Take, for example, the Bank of England's comment that the U.K. economy will be sluggish. This comment put downside pressure on the GBP USD this morning which carried over into the New York session.

The SNB comment that it will take firm action is likely to encourage upside pressure on the USD CHF over the near term. Traders could push the Dollar higher versus the Swiss Franc on the threat of an intervention.

Recently the Bank of Canada commented that the high price of the Canadian Dollar may have a negative effect on exports at some time in the future. Although they expressed no critical concern at this time, just to mention that they were monitoring the price level has been enough to drive the Canadian Dollar down over the short run. A drop in crude oil or equities may trigger an even deeper slide.

The easiest market to break is the Japanese Yen. If a U.S. Dollar rally sparks another leg up in the stock market then the Yen is likely to collapse further. The toughest markets to break at this time are the NZD USD and AUD USD. Both are at major retracement points but still holding on to support. Both pairs will continue to rally as their respective economies improve and there is still demand for higher yielding assets.

This week has been highlighted by low volatility and sideways trading. I suspect the primary cause of this type of action is a fear to take a side in a major position ahead of the Fed meeting on June 24th. Like the other central banks, the Fed is not expected to do anything with interest rates or announce additional quantitative easing plans. It will, however, provide an official statement to investors around the world on what it intends to do during the second half of the year. With no meeting scheduled until August, this meeting€™s comments will take on additional significance.

Following May's lower than expected Consumer Price number announced earlier in the week, many investors are now calling for the Fed to break from its plan to raise rates by the end of September to perhaps stall the rate hike until early next year. Whatever it decides will have a major impact on the long-term structure of the markets for the next 6 to 9 months. This is why I feel that this FOMC meeting will be the most important for the year.

Continue to expect lackluster trading until the Fed news is released. This may mean more sideways and choppy action until June 24th while traders and investors reevaluate long-term positions. After this FOMC meeting, traders will have more direction as to how to approach the market. Enjoy the low volatility this week, but be prepared for next week.

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