NEWS / Foreign Exchange

FED And Payrolls Will Determine Dollar's Future??¦

Anotherweek, another new low for the dollar, with EUR/USD well above 1.44 at Mondayopen. As the pair keeps trading above 1.44, there is a lot of speculation abouthow high will it reach before some kind of correction occurs??¦

            Last week, although we didn??™t havemuch economic news in the calendar, nevertheless the ones we had were reallybad for the greenback, with housing numbers printing yearly lows. Marketplayers did sell the dollar at the news, as the risk of further losses in theAmerican currency after a bad economic indicator is almost non existent!

            This week we have plenty of eventsto keep us occupied, with the FOMC meeting and non farm payrolls being keyevents for the short term future of the dollar.

            On Wednesday, we also have GDP outof the US,and with the risk of this number coming lower than previous the dollar willprobably suffer another wave of selling all across the board. Also we have ISMmanufacturing and non-manufacturing for an idea of how the business sector isperforming and last but not least our all time favorite non farm payrolls onFriday. The previous number did surprise the markets as it was not only betterthan expected but also revised better than previous negative number. Market didtrade the news in dollars favor to start with, however later on the dollarbears gave way to further dollar losses and in the end the good news seemedlike a far fetched dream.

            We see that market is so negative toany news at the moment that even with good economic numbers from the US, there isstill losses in the greenback. The very fact that EUR/USD is trading above 1.43for a few consecutive days, shows that traders have one thing in mind: 1.45 andmaybe above??¦

             The question is what will Bernankeand pals do at the policy meeting? Will they take the ???safe??? approach and cutrates once again in order to stabilize the housing problems? Or will they leaverates unchanged due to the very low dollar levels and fear of further deteriorationin the markets? Their job will be once again very difficult as it seems likewhatever they do will have almost the same impact in the markets psychology. Ifthey cut, that might initially be welcomed as relief but later can beinterpreted as a panic move from the bank and therefore can be met with a selloff in stocks and equities. If they don??™t cut and leave rates unchanged,although initially good for the greenback, global markets will suffer as thismove can be interpreted as lack of action by the FED. So, thing to watch is notonly what the FED will do, but HOW will the market interpret the action!

            Today Monday there is nothing majorout data wise,  therefore as it is thestart of the week, we might see some consolidation for the dollar, as itreached again extreme over bought levels at 1.4435. Next level to watch will be1.4450 and then 1.4485-1.45(important psychological level for all traders)??¦