The major currency pair EUR/USD stayed in the range in anticipation of two significant events: the result of the Fed's two-day meeting, which began today, and the outcome of the election of the Chancellor in Germany.

In principle, both events are not surprising. It is assumed that the Fed will not raise interest rates and it is likely to announce the beginning of a reduction in the balance this year. As for the elections in Germany, the current chancellor A. Merkel is leading and she will most likely be the winner in the pre-election race.

However, considering these two events more closely, the decision to reduce the Fed's balance sheet is expected and may become more extensive than the market expectations. There is a speculation that the bank will decide on a monthly reduction worth of $10 billion which is a drop in the sea. But, if a figure, for example, $40 to 50 billion, is announced, this should signal government bondholders to review their outlook and start selling them. This will be the initial sign for a smooth increase in demand for dollars and the reversal of all market views towards the almost ten-year period of the soft monetary policy of the U.S. Central Bank which would about to end.

Regarding the impact of the election results of Merkel on the decision of the ECB to stop stimulus measures, this exemplifies the current political and economic direction of the eurozone. It is difficult to say whether Merkel's courage will give M. Draghi confidence and affect ECB's decision to end the economic stimulus this year. The bank will certainly receive support, primarily moral from FRG, but weakens the level of consumer inflation at around 1.5% for two months in a row. This would cool down Draghi's ardor and compel the regulator not to completely eliminate the measures to support the economy but to continue its reduction instead as how it was last year. If the outcome of the October meeting of the central bank will be such a decision, it is unlikely that the single currency will hold at current levels against major currencies, with no exception of the U.S. dollar.

Forecast of the day:

The EUR/USD pair continues to consolidate in the range 1.1835-1.2070 before the outcome of the Fed meeting on monetary policy, as well as before the election for the new chancellor in Germany. From a technical point of view, the price could not surpass the 1.2000 mark, so there is a possibility of a local turn and a decrease towards 1.1835.

The GBP/USD pair resumed the decline and could decline to 1.3400 with the next prospect towards 1.3300.