Dollar tests support in front of FOMC

The U.S. Dollar continues to sink to support as the FOMC decision on rates looms.

There are quite a few things to consider when noting the slide to current support at 76.788.

There is not assumption that the dollar will gain strength any time soon. A 25 basis point cut is largely discounted into the U.S. Dollar Index. Remember that a 50 basis point cut is not out of the question as that too has been factored into the dollar - albeit to a lesser degree.

Bernanke does not seem overly concerned (based on his statements and past actions) that a weak dollar will lead to inflation and add to that he is battling with a weaker housing market and mortgage debacle. A 50 basis point pro-active rate cut is not unusual as former-chairman Greenspan has used this in the past instead of two 25 basis point cuts.

Any cut is also going to benefit U.S. exports which are already enjoying the weakening dollar - and this further strengthens the rate cut argument. Regardless of the result there are set ups that are currently forming in front of this important decision on rates.

This is also supported by the U.S. Dollar Index price action which has been swiftly sold as each bounce during the downtrend; most recently at the pierce of the 78.00 level on October 20th during the day long dollar rally.

The dollar weakness continues to push the cable higher as the rising wedge on the daily chart continues upward.

There will be resistance up past the 2.0625 level at the July 24th high of 2.0654. Any move beyond that is a new 12 month high.

The USD/CHF is moving lower within a falling wedge as it finds support at 1.1600. Any bounce can be shorted between 1.1720 and 1.1750.

There's also a beautiful head and shoulders pattern that has formed on the GBP/JPY daily chart.

Raghee Horner is a private forex, futures, and stock trader based in South Florida. She is the author of two best-selling forex trading books and a sought after speaker. All charts we used with permission from Autochartist.