Pre-FOMC Trade thoughts-18th Feb ‘09

We are just about an hour plus away from FOMC release and here are my pre-trade sentiments.

I don’t see a very clear consensus on US based sentiments as i see a mixed pattern of movements across all currencies. Therefore, i won’t be taking a pre-news sentiment trade as the picture is very murky.

Gbp/Usd – After the huge drop with UK open, the sterling has inched back up slowly,with just about 20-30 pips away from pre-UK Open price. There was heavy dumping of sterling then, but it seems to be short term move as almost all has gained back. With FOMC, a weakening dollar is unlikely against the GBP, therefore i won’t recommend nor do i foresee a rally of Gbp/Usd

Eur/Usd – This looks more like the actual picture we intend to see. With both UK and US sessions devaluating the Eur against the Usd, i see it as the possible partner to trade if we are to see a USD rally.

Usd/Jpy – Hellow hellow, this pair has hardly came on our radar as late because it has been just straddling sideways for months now. However, today i see clear USD strength against the Jpy, with all bullish candles on the hourly chart. This is setting the pace that USD will gain strength against the Jpy and with 93.00 handle broken, i am curious to see some uptrend on this pair. I however, won’t expect the rally to last, at least in the short term or have much range.

Bottomline

If we are to see consensus the same as expected, i see exxagerated brutal strength for the dollar again, just like last month and i will sell Eur/Usd. If we are to see the market disappointed or have mixed results from FOMC, i will expect a weakened dollar and i might sell Gbp/Jpy and perhaps Usd/Jpy too, but with a bit more caution.

All the best,
Seeni

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