Dollar Range Bound Ahead Of Bernanke's Last FOMC Announcement

 | Jan 29, 2014 02:17AM ET

Asian markets are generally higher today, following the recovery in US as risk aversion waned. The Turkish central bank more than doubled its interest rates, from 4.5% to 10.0% and triggered a rebound in the lira. The India rupee also strengthened as Indian central bank unexpectedly hiked benchmark interest rate by 25bps to 7.00%. The Dow rose 90.68 pts, or 0.57% to close at 15928.56 overnight. But it should be noted that the Dow was kept below 16000 handle in spite of the recovery, and well below 55 days EMA at 16086. Near term risk remains on the downside. Also, treasury yields also dropped overnight with 10 year yields down -0.02% to 2.746% and 30 year yield was down -0.008% at 3.672%. Risk aversion was just eased but the sentiments haven't reversed.

FOMC meeting will be the main focus today and this will be Bernanke's last meeting as Fed chairman. Fed is expected to announce another reduction of USD 10b in asset purchase and bring the monthly pace down to USD 65b. Attention would be on whether FOMC would comment on the disappointing December employment data. It's still generally expected Fed to continue the pace of USD 10b cut in asset purchase during every meeting and end the program within this year.

The dollar index continues to hover around the flat 55 days EMA for the moment, near to mid point of recent range of 79.68/81.48. At this point, we'll stay neutral in the index and need a break out from mentioned range to clear the outlook. Break of 79.68 will have some bearish implication and put key cluster support level at 79.00 into focus. Meanwhile, above 81.48 will revive the bullish case and bring stronger rally back towards 84.75 resistance.