Fed is widely expected to keep monetary policy unchanged today. Despite recent resurgence in coronavirus infections and the economic impact, roll-out of more fiscal stimulus and positive vaccination progress would keep policy makers in a wait-and-see mode. Federal funds rate will be held at 0-0.25% while asset purchase will continue at current pace of USD 120B per month. Chair Jerome Powell would likely re-emphasize that Fed is in no position to even start discussing tapering of quantitative easing yet.
Here are some suggested readings:
- FOMC Preview – Cautious about Economic Weakness but Fiscal Stimulus should lend Support
- Fed Meets: A Non-Event or the Start of a Brewing Dilemma?
- FOMC Meeting Preview: USD/JPY In Focus As Powell Holds Fire
- The Economic Outlook: What Could Possibly Go Wrong?
- January Flashlight for the FOMC Blackout Period
Dollar Index is staying in range trading for now, reflecting the consolidation in most Dollar pairs. DXY is held below falling 55 day EMA, as well as 91.01 near term resistance, keeping outlook bearish. The down trend from 102.99 would more likely extend lower than not. Though, downside momentum has been clearly diminishing as seen in daily MACD. Hence, we’d expect strong support from 61.8% projection of 102.99 to 91.74 from 94.74 at 87.88 to contain downside and bring sustainable rebound, even in case of another down move.
