Where is the U.S. dollar headed as we approach the next FOMC meeting?

Market Pulse for August 11

Last week the September 2013 USD Index (NYBOT:DXU13) did not move much between open and close with last week’s open at 82.120 and close at 82.167. We saw a weekly high last week at 82.780 and low at 81.935. Moving into the week of Sept. 9 my weekly BULL numbers are 82.567 and 83.096 and my weekly BEAR numbers are 81.722 and 81.406.

On the horizon, a FOMC meeting is coming, actually next week on Sept. 17 and 18. Will we see tapering? Will we see a hawkish Fed or a dovish Fed? To prepare the U.S. dollar for a hawkish Fed or even tapering, the U.S. dollar needs to drop. If you look back to June 19 on the daily chart you can see the move up in the U.S. dollar. On June 19 Ben Bernanke spoke and was hawkish stimulus and the U.S. dollar moved from 81.000 to 85.000 fairly quickly. And take a good look at the price action that preceded this hawkish stance. If this drop did not take place and Ben came out hawkish, the U.S. dollar would have climbed from between 84-85 settling close to 88. The Fed does not want the U.S. dollar at 88. Now take a look at the drop following July 10, a day Ben Bernanke came out dovish stimulus. See the U.S. dollar drop. Neat isn’t it. So if in fact tapering is coming, the Fed will try to keep the U.S. dollar from rising too far from where it is today. After all if tapering is announced just how far and fast will the dollar rise, looking back at June 19 will give you a good idea. Have a prosperous week.

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