Taper Or Not To Taper? FED Make Up Your Mind
Recent fundamentals have been playing heavily on the markets. US Fed stance has moved from “Taper or Not to Taper?” to “When to Taper?”, at least that’s what I gathered from yesterdays’s FOMC announcement.
If the above statement went over your head and you are lost then here is a quick low down.
Quantitative Easing (QE) is a fancy word for printing money from thin air. When Fed prints more money (more supply) the value of each US Dollar goes down. When they stop printing the price goes up i.e. Dollar Index goes up (EURUSD, GBPUSD etc fall).
Right now Fed is printing at a rate of 85 billion dollars per month, which they are looking to cut down/stop if the economic numbers improve such unemployment rate, new job creation, CPI etc.
So far things are looking on the up for the US economy, at least that’s what the number says. All eyes are now on next NFP data followed by next FOMC meeting in the middle of next month.
Technically, this indecision is hurting how we trade. The market is undecided and is range bound. US Summer months are usually slower and fundamentals not doing us any favor.
However I am hopeful about the future. Once tapering starts we should see US dollar starts to gain strength and nice sell-off in pairs such as EURUSD, GBPUSD, AUDUSD etc.
From where we stand today Dollar Index is testing Channel high, bouncing up from double bottom. I would like to see a breakout above but price could also move sideways before eventually moving higher.