September tapering is here

EUR:

EUR/USD gained strength all week long last week, and despite a slowdown in bullish momentum on Thursday, the pair stayed well supported. Overnight, the pair opened with a 60 pips bullish gap opening at 1.3362. The pair pulled back slightly but failed to fill the opening gap and spiked higher on weaker than expected Empire Manufacturing Index which fell to a four-month low this Monday.

The FOMC meeting to held on Tuesday 17th and Wednesday 18th will add volatility to the pair. According to Bloomberg forecasts, the Treasury purchases will be reduced by $10 billion while the MBS Purchases should remain unchanged at $40billion per month. Any unexpected news arising from the FOMC meeting is expected to add high volatility to an already nervous market.

USD:

Last week the Dollar index lost ground from its opening level at 82.23 down to 81.45. The greenback was under pressure due to recent disappointing economic data and as markets braced for the Fed to scale back its massive $85 billion monthly bond-buying stimulus by a modest $10 billion this week.

The US dollar hovered near a four-week low against a basket of major currencies on Monday, after former Treasury Secretary Lawrence Summers withdrew his name as a candidate to lead the Federal Reserve.

Summers was expected to taper more aggressively and therefore is perceived more hawkish by the market. His withdrawal from the Fed's race will allow lighter approach to tightening monetary policy. On the other hand Janet Yellen, who's seen as more dovish on her policy approach, appears to be the best option left for the succession of Ben Bernanke.

GBP:

After the strong bullish rally that occurred last week in Cable, it extended its gains on Monday and GBP/USD kept rising to its highest level since Jan 18 at 1.5963, leaving the weekly opening gap still in place.

This week, several significant macro-economic numbers are expected to be released, more importantly, the BoE minutes and retail sales. According to analysts, the minutes should be slightly more optimistic than usual thus sustaining the current currency rally.

From a technical point of view, further upside potential in anticipation of the FOMC meeting remains probable though profit taking, risk aversion and the approaching key level of 1.60 should be factors weighing on the pair.

JPY:

Japanese yen gained strength following a better view on the economic outlook expressed by the Cabinet in their monthly economic report. According to the report, the economy is "picking up steadily and shows some movements on the way to recovery."

USD/JPY rebounded on its 99.329 support level overnight after the bearish opening gap that sent the pair lower.

AUD and NZD:

Last week was quite agitated for commodity currencies as the Australian dollar extended its losses while the New Zealand dollar climbed higher.

With New Zealand's economic outlook remaining encouraging, the PMI services, current account and Q2 GDP numbers should keep the traders' attention on the currency.

Gold:

Gold dropped from $1,391.492 an ounce over the week to close at $1,323.755 an ounce on Friday, after hitting a low of $1305.005 earlier in the day. That's a decline of 4.9% or $67 within last week.

This week, the spotlight is now firmly fixed on the much awaited US Federal Open Market Committee (FOMC) statement on Wednesday, when traders could finally get their answer about when the central bank will begin tapering its $85-billion-a-month bond purchasing program. The statement is expected to produce high market volatility throughout the week.

Traders will focus particularly on any changes between this month's and the previous month's statements, for hints on when the US Federal Reserve could begin scaling back on its monthly bond-buying program. The statement will also provide the FOMC's economic forecasts for inflation and economic growth over the next two years. Following the release of the statement, Federal Reserve Chairman Ben Bernanke will speak during a press conference, which traders will pay close attention to, as his comments are likely to send the financial markets nose-diving or skyrocketing.

Among other precious metals this week, Sliver dropped to $21.40 from the session's open of $21.79 on Friday.