Yes, the glory days are back! Once again Bernanke is happy to have gained the appeal in the market and managed to revitalize his influence as markets shake and tremble ahead of the Federal Open Market Committee final vote on monetary policy!
The feds are caught between a rock and a hard place! The rock being the waning recover of the world's biggest economy which seemingly to have missed the turn to shore and the weakness is being broadcasted at broadband speed. Meanwhile, the hard place is the failure to cave to the markets' expectations, and the high anticipation of a sort of signal, a vibe, or an actual move into a more accommodative lenient monetary policy to support the economy.
Either or, the market is frantic and tending to be more delusional over the outlook for the recovery, as the long euphoria of upbeat data actually misled many into believing that the AGONY IS OVER! Aversion and avoidance are the mark in the market today and investors are heading to the dollar and the yen in preparation for a market reaction likely to go sour either or, so the safety net was again the dollar!
Here is the case, the data today were also soft, not market movers but soft and build on an already keen expectation that the decision today will move the market. The dollar was already in need of a savior and a definite correction and the Feds just provided the means. If we assess the dollar according to the gauge against the six major traded currency the index is trading bullishly today and reversed from lows reach yesterday a notch away from the 61.8% correction for the last upside rally from 74.26 to the top recorded at 88.70.
The index is currently hovering around the 50% correction for the aforesaid rally around 81.46 shy off its highs recorded today at 81.51 and off early lows at 80.67. Over daily basis we can see signals for reversal especially on Stochastic yet confirmation was not provided with a definite crossover and that will only be supported according to our analysis by stability above the 50% correction denoted around 81.50.
Speaking of the dollar's strength, the yen was rather resilient to the dollar bulls as the pair currently is fluctuating around opening levels at 85.90 after recording the high of 86.23 and the low of 85.61, a clear sentiment of jitters in the market especially with stock markets trading red and the FOMC decision growing closer.
The euro on the other hand, was not as lucky as the yen and neither was the pound where good trade data failed to poise sterling for gains.
The single 16-nation currency continued its bearish trend for the second day trading softer now after leaving its high earlier near opening levels at 1.3233 failing to continue higher sent the pair lower from those areas and the bears strength increased with the breach of the 1.3115 reaching so far the low of 1.3072 where this support might restrict the pair for now just still we see potential for the bearishness to continue towards 1.2990 at least and might extend further.
Sterling also suffered the same jitters in the market as fears over the prospects for the global recovery continue to haunt the market, and sterling is extra sensitive especially ahead of the BoE's Quarterly Inflation Report tomorrow which will detail the economic prospects for the latter half especially amid skepticism that the second quarter's strong pace will persist.
Sterling reversed to the downside from early highs recorded at 1.5904, a successful retest for 1.5830 areas sent the pair again to the downside where as far as the 1.5945 areas remain intact the bearishness will remain valid. The pair so far recorded a low of 1.5708 bouncing back slightly higher to trade currently around 1.5745.
The market is likely to remain volatile and mixed until the FOMC rate decision and surely the revelations by the feds will be strong enough to either help the dollar continue the upside correction or send it down to its misery once again...