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FX: Greece Causing More Trouble, FOMC Meeting Begins

Last updated 1/24/2012 9:14 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

It has been another lively morning in the foreign exchange market with early enthusiam in the euro fading quickly. Having traded to a high of 1.3063 shortly after the European open, EUR/USD fell sharply on reports that Greece could be downgraded to "selective default" by S&P. Everyone from rating agencies to investors are losing patience with Greece and coming to the realization that a resolution to the country's debt troubles may not be reached until the eleventh hour when a deal is put together haphazardly. January is becoming February and now there is even talk that the new deadline will be in March. Given that the EUR/USD's gains have been fueled largely by the false promises of a Greek deal, the EUR/USD is selling off quickly. Having slipped back below 1.30, there is no major support in the EUR/USD until 1.2850.

Meanwhile, the Federal Reserve's 2 day monetary policy meeting has begun and policymakers will be taking their time to artfully craft a statement that would explain their Fed funds forecasts in a way that would minimize volatility. The most important thing to look for tomorrow is the timing of the first rate hike - will it be in late 2013 or early 2014? Our outlook for the FOMC meeting will be covered in a more detailed report later this afternoon. With no major U.S. economic data on the calendar today, we look North to Canada's retail sales report. Consumer demand rose 0.3 percent in November which was stronger than expected but weaker than the previous month. The latest report sent the Canadian dollar lower and explains why the central bank did not upgrade their outlook for the Canadian economy last week - growing uncertainty in Europe, uneven signs of recovery in the U.S. and slower domestic demand means that easy monetary policy will remain their mode of operation for the foreseeable future.

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.