The EUR/USD logged sizable losses yesterday as we witnessed a broad-based preference for the Greenback despite a breakout in gold and U.S. equities ending slightly positive. Therefore, it seems downward momentum was more in control than correlations and fundamentals. Speaking of gold, yesterday's breakout was impressive, and the precious metal is looking to test its psychological $1100/oz level. Though much of gold's strength may be attributed to India's large bullion purchase from the IMF, the breakout could also signal another pullback in the Dollar due to their negative correlation. In fact, the EUR/USD and GBP/USD have posted encouraging gains since yesterday's bottom as investors await the FOMC's monetary policy decision this afternoon. Since the Fed is expected to keep a loose monetary policy for the foreseeable future, any unexpected wording would likely have a large impact on the Dollar. If the Fed does stand pat as anticipated, then tomorrow's ECB and BoE meetings should carry some more weight in the FX markets.

It will be interesting to see how the ECB behaves tomorrow since the central bank has recently voiced its displeasure of such a weak Dollar. Since the Chinese RMB is pegged to the Dollar, the Euro has also lost a lot of value against the Yuan, causing further damage to the EU's recovering manufacturing sector. However, the EUR/USD has pulled back from October highs following the ECB's public objection, so it is uncertain whether the central bank will continue to be more Hawkish or omit more of a neutral tone. Considering these observations, the ECB's rate meeting tomorrow has an air of uncertainty to it, meaning volatility may pick up over the next 24-48 hours.

Meanwhile, the S&P futures have climbed back to their psychological 1050 mark while crude trades around its own psychological $80/bbl level. Therefore, the bulls have placed the riskier investment vehicles back into a more reasonable position following last week's large pullback. As a result, the EUR/USD finds itself at a crossroads as well. The currency pair has multiple uptrend and downtrend lines we can create while the psychological 1.50 level bears overhead and the psychological 1.45 level rests underneath. Therefore, investors should keep a close eye on the Dollar's reaction to upcoming monetary policy decisions until the Greenback commits to a new near-term trend.

Present Price: 1.4780

Resistances: 1.4796, 1.4814, 1.4828, 1.4847, 1.4859, 1.4876, 1.4890

Supports: 1.4773, 1.4759, 1.4740, 1.4711, 1.4684, 1.4648

Psychological: 1.50, 1.45