The US Central Bank is largely expected to trim the last $15B of QE despite some comments of a couple of voting members expressing concerns over low inflation and the need to extend the facilities program. Therefore, market attention will focus on rates’ wording and if the Central Bank keeps the “considerable time” on rates near zero, or the “significant” when it comes to the under use of labor resources. In such case, the FED’s posture will be quite conservative, and dollar may suffer a kneejerk across the board: the EUR/USD then has as a possible bullish target the 1.2790 price zone, with a break above triggering stops and fueling the rally up to 1.2840. Same goes if the Central Bank decides to trim less than the total remaining.
If the wording is softened and any of those removed, market will rush to price in a sooner rate hike, fuelling a dollar rally across the board: in the EUR/USD the probable bearish target in the short term comes at 1.2660, followed later by the 1.2600/20 price zone.
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