The dollar selling frenzy that happened on Monday in reaction to the announcement of Larry Summers withdrawing his candidacy to be the next Fed chairman has eased and we have seen a reversal since the US session. Further gains in the dollar were made in Tuesday’s Asian session.
Market focus is now on the Federal Reserve policy meeting. The two-day meeting begins today and will conclude on Wednesday with hopefully some decision on when and by how much the Fed will being tapering.
Expectations are for about $10 billion in cuts to the current bond buying program. The rally in the euro was short lived as the sell off in USD faded. EURUSD soon switched to a downside bias. In Asia the pair reached as low as $1.3324. Any upside move will likely be limited as we approach the FOMC meeting tomorrow.
GBPUSD was a little quieter in the session, trading sideways with strong support at $1.5887.
USDJPY opened in Asia at 99.05 and moved higher throughout the session to reach a high of 99.35 yen.
AUDUSD slipped lower ahead of the RBA minutes release to finally fall to $0.9284 after the release.
In the upcoming European session the ZEW Indicator of Economic Sentiment for Germany will be closely watched.Publication source