EUR

Here's the rationale for our EURUSD longs 3 hrs before the FOMC:

(see last parag)

Figuring out the technical dynamics of EURUSD or any other pair) ahead of today’s FOMC meeting is especially paramount because it rides out the inherent volatility ahead of the announcement and the release of Fed’s summary projections at 14:00 ET (19:00 BST), followed by Fed Chairman Bernanke’s press conference at 14:30 ET (19:30 BST), which could aim to neutralise the effect of the tapering announcement by focusing on matters such as lower inflation forecasts, GDP downgrades and reiterating that 6.5% unemployment is a threshold and not a trigger for higher interest rates. We spoke in more detail about the fundamentals of the FOMC decision in the gold section yesterday. Technicals are now showing a bullish shift in the long term according to our monthly stochastics, which are positive across all 3 panels (see chart). 3 weeks ago we were positive that EURUSD would reach 1.3100 but it was limited to 1.3105.

The dynamics have now shifted. 1.3440-50 is the next objective, followed by 1.3530s. The possibility of a pullback towards 1.3250s remains viable but this should be followed by a renewed recovery towards 1.3450s.

And heres what we wrote on GBPUSD

GBP rally continues as we stuck with our longs over the last 3 weeks Today’s hawkish minutes from the BoE’s MPC revealed an upgrade in 2013 GDP to 0.7% from 0.5%, which bolsters GBP status as the better currency to bid in the event of a Fed tapering of no greater than $10 bn. The Aug 2009 trendline resistance (see today’s chart) suggests the barrier is at 1.6370 for this month. Accordingly, we issue 2 longs targeting 1.6270 and 1.6310, while maintaining the unfilled longs. The only reason to expect a lasting decline in GBPUSD would be a fundamentally-driven factor from the US, such as a taper of $15 bn or more, or aggressive upgrades across the board in the Fed’s central tendency forecasts (GDP, inflation) and downgrades in unemployment, which is unlikely.

Ashraf