EUR/USD will be the main focus of the Wednesday trading session in my estimation. With the Federal Reserve set to make an announcement that could even include more easing, and the Greek lawmakers supposedly coming to some kind of deal between three different parties, there is a real chance of fireworks today.
The biggest mover will probably be the Fed’s announcement as the Greeks have already let the markets down time and time again. There is little appetite for believing anything that comes out of Athens, as the markets have been burnt more than once by that legislative body. With this in mind, all eyes will be on the Fed.
The Federal Reserve is suspected of continuing the “Operation Twist” procedure where they buy long dated bonds to keep rates artificially low. However, there are some that think that they will do very little, as the rates for Treasuries are already very low with demand high. If the problems persist in Europe, this will only continue to be the case.
After the announcement, a lot of hands will be played
There is a ton of chatter going around the various wires over the last few days about what the Fed is going to do. The truth is that not everyone is on the same page, and I believe the next two hours after the announcement will be very telling. (The announcement is at 2:15 pm Eastern Standard Time) It is at that point that a lot of traders will have to play their hands with real money. I plan on being the “smart money” today, and wait until they show their move.
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Because of this, I am going to trade in the direction of the daily close. However, I don’t want to hold onto Euros for long, so this would be a short term position if the EUR/USD goes higher. After all, we are nowhere near the end of the European issues. With this being said, I prefer that the market is disappointed, as the gap is still holding as resistance at this point in the week. None the less, I am flat until 0:00 GMT.