EUR/USD (a 4-hour chart)
The U.S. dollar was traded mostly unchanged against its major counterparts on Monday, as investors remained cautious to open up fresh positions on the eve of the release of the Federal Reserve System, at the end of this week.
The dollar performance index indicator of the U.S. dollar against six currencies fell by 0.06% to 81.25. Index WSJ, which tracks the somewhat broader the currency basket, grew by 0.06% to 73.59. The Fed plans to release protocol of the Meetings of the Committee on the open market (FOMC 30-31 July) on Wednesday and traders want to know the views of policy makers about the current program of quantitative easing. Increased worries that the Fed may soon start to narrow its bond purchasing program led to massive sell-offs in equity markets last week, while the demand for U.S. Treasuries rose. The protocol could point to a narrowing of the stimulus of the Fed next month.
This, combined with an increase in yield of U.S. Treasury bonds, may lead to some strengthening of the dollar this week, "- Marcus Hettinger, global FX strategist at Credit Suisse said. On the other hand, if the Fed continues to apply too soft position or does not provide any definitive prediction of when it can begin to move away from quantitative easing (QE3), the dollar may weaken against the major currencies. Adam Cole, chief FX strategist at RBC in an interview with Reuters, said that the process of narrowing may begin in September. However, Cole added: "If the record does not give any strong hints so there is a risk of waiting until the restrictions from September to October."