Forex market keeps a �wait and see� attitude before FOMC rate decision

Waiting Wednesday FOMC rate decision, the Dollar could find support on the sentiment that the US interest rates are likely to stay on hold at 5.25%. US consumer Confidence rose to its highest level in over 4 years in January. The headline confidence index rose to 110.3, from a revised 110. Consumers seem to have been encouraged by the continuing strength of the labor market, while the fall in gasoline prices this month was likely a positive factor. Elsewhere, negative sentiment weighted on Yen and CHF as carry-trades in which investors borrow these low-yielding currencies to buy higher-yielding ones continued. Analysts said the Dollar-Yen focus is still very much an interest rate story, with investors taking out expectations of US rate cut and also removing Japanese rate hike expectations in the short term. Overall, dealers and investors wouldn�t take new positions before seeing the Fed�s policy statement and having some clues about future rate moves.

News and Events:
The Dollar was steady against the Euro and the Yen on Tuesday, remaining in narrow ranges as dealers awaited a deluge of US economic data this week that could set the course of monetary policy. The start of FOMC policy meeting expected to end on Wednesday with interest rates steady at 5.25% also kept the Dollar in tight range. Analysts and Investors attention will be focused on the statement following the Fed�s decision to anticipate what would be the future rate move. US consumer Confidence rose to its highest level in over 4 years in January. The headline confidence index rose to 110.3, from a revised 110. Consumers seem to have been encouraged by the continuing strength of the labor market, while the fall in gasoline prices this month was likely a positive factor. EurUsd closed unchanged at 1.2964 as the Dollar got a little bounce after US consumer confidence index in-line with expectations. Meanwhile, comments on the weak Yen from European policy-makers continue to pressure the Japanese currency. Negative sentiment also weighted on Yen and CHF as carry-trades in which investors borrow these low-yielding currencies to buy higher-yielding ones continued. UsdJpy was down -0.11% to 121.62 still close to the four-year peak of 122.20 on Monday. EurJpy ended up 0.13% at 158 near the record high of 158.63 made last week. The big mover was NzdUsd, the highest yielding in most liquid currencies, which fell -1.28% to 0.6874 on a breakdown in technical support.

Today’s Key Issues:

Euro 10:00 GMT: Euro-zone December Unemployment rate expected 7.6% unchanged, Euro-zone January Business Climate Indicator expected 1.5 vs 1.6, Consumer Confidence expected -6 unchanged, Industry Confidence expected 5 vs 6, Services Confidence expected 18 vs 19, Economic Confidence expected 109.7 vs 110.1 and Consumer Price Index Estimate 2.1% vs 1.9%.

CHF 10:30 GMT: KOF January Swiss Leading Indicator expected 1.52 vs 1.60.

CAD 13:30 GMT: November Gross domestic Product expected 0.4% vs -0.4% (MoM).

US 13:30 GMT: 4Q Gross Domestic Product Annualized 3% vs 2%, 4Q Gross Domestic Product Index 1.6% vs 1.9% and 4Q Employment Cost Index 1% unchanged.

US 15:00 GMT: December Construction Spending 0% vs -0.2% and January Chicago Purchasing Manager expected 52 vs 51.6.

US 19:15 GMT: Federal Open Markets Committee Rate Decision expected 5.25 unchanged.

The Risk Today:

EurUsd the Euro outlook remains bearish within the 1.2878 � 1.3045 range. Further downtrend would trigger the 1.2866 marking the next downside support. A break would open 1.2820 (61.8% retracement of the 1.2483-1.3368 rise). This view may be reversed with a move above 1.3050.

UsdChf is consolidating and still well supported by last week 1.2430 level, which provided a base for the rise through 1.2550 resistance. Further retest would open the way toward 1.2585 next resistance.

GbpUsd remains vulnerable following the impulsive sell-off from the 1.9917 trend high. It made little rebound on 1.9550 but renew weakness may put the 1.9512 support in focus (61.8% retracement of the 1.9261-1.9917 rally). 1.9700 may provide short term initial resistance.

UsdJpy has been consolidating under recent high 122.20 and 121.50 recent lows. The focus is still on 122.4 (61.8% retracement of the 135.18-101.67 decline). In the near term, initial support stays at 121.40, but only a move below the 119.90 former psychological level would show a trend reversal.

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Resistance and Support:

Yes its a very good trading strategy to wait and watch before the economic news rather than speculating because you never know what number is going to come out