FX Currencies in Sideways Trading Ahead of FOMC Statement - 17.6.2013

Major currency pairs are extending their trading in range zones as traders are not willing to take much risk ahead of the FOMC statement, while previously high volatility dominated in FX market. Speculation is mounting that Bernanke may attempt to calm down concerns about asset purchases withdrawal. The US dollar index is fluctuating between upper level at 80.96 and lower level at 80.53, which is also its 4-month low, since previous Thursday with major monetary decision later in the week limiting volume. The greenback has been losing in previous weeks as speculation was increasing about FED QE reduction. Should Bernanke in its coming statement say that is not in immediate plans to tighten policy, could raise the US dollar. However, that is a controversial effect, since holding a more aggressive policy should weigh on the currency. In addition, assurance that QE will not be reduced in following months would raise risk and support equities.

Asian equities recovered today with NIKKEI 225 rising by 2.73% to 13,033 and Hang Seng is gaining by 1.33%. On the other hand, US equities on Friday dropped as US Industrial Production data and Consumer Sentiment index was lower than expected setting pressure on US indices, with S&P losing 0.59%. The EURUSD also remains in sideways area between 1.3390/1.3291 waiting for FOMC statement; in case the greenback recovers the EURUSD would enter in bearish mode. Technically the Euro against the greenback is around 61.8% of 1.3710 to 1.2744 and that could weigh on prices. Later on today eyes will be focus on the Group of Eight meeting, likely to discuss Eurozone debt issues and Central Banks policies, on Thursday Euro group meets as well.