Greenback Bearish Ahead of Fed Meeting

Following the losses the US dollar took during the European trading session today, investors will be eagerly watching for news out of the two-day Federal Reserve Policy Meeting scheduled to start tomorrow. The USD started off the week on a bearish note following an increase in risk taking due to apparent signs of a euro-zone economic recovery. The trend brought the EUR/USD above the 1.3000 for the first time in nearly three-weeks, while the AUD/USD shot up over 100 pips over the course of the day.

Whether the greenback will maintain its downward trend for the rest of the week will largely be determined by the results of the Fed meeting. While the Federal Funds Rate is not expected to go up when the indicator is announced on Wednesday, investors will be watching the meeting closely for clues as to when US interest rates will go up. Should the Fed decide to maintain its current policy of record low interest rates for the near future, traders will likely take it as a sign that the US economy still has a long way to go toward full recovery. Such an event may lead to further losses for the greenback.

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