We have the usual hyped-up stand-off ahead of the actual announcement.
Stop me if you’ve heard this before but I will be waiting to see what actually happens rather than get involved in a crap shoot prior ( and I choose my sporting reference carefully!)
The minutes from the last meeting showed the decision not to taper was a close call but the relevance of this stance has since been reduced/dismissed given the partial US govt shut-down and the less than accurate data releases since then.
So to taper anytime soon would surely be reckless, un- not fully informed, and careless at the very least on first sight, but Bernanke and others are only too aware of the dangers of extended QE and remain keen to turn down the speed of the printing press.
So we’ve seen some USD buying/book squaring ahead of tonight’s decision but if there is the merest hint ( as there has been recently) of any taper being pushed out to 2014 then expect a rush to get back out of the greenback.
Key pairs are at, or near, key support/resistance levels ( EURUSD 1.370030, GBPUSD 1.6000-25, USDJPY 98.50-99.00) and it won’t need much for USD/taper bears to drive the greenback lower from here with EURUSD the biggest beneficiary given its underlying support.
Similarly USDJPY and USDCHF have good room to fall again having staged decent recoveries of late, with the latter getting an extra kick from today’s upbeat data. Watch out for support though at 97.20-50 and 0.8885-0.8900 respectively.
Any hint of taper sooner and of course we’ll get the knee-jerk USD rally.
But my gut tells me that traders will still prefer to sell into that with the uncertainty / unreliability of future US data still weighing heavily. Any tightening of monetary policy in these fragile times wouldn’t necessarily be something over which to get too happy-clappy just yet .
