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2. If the FOMC extends the Twist, then sell EUR/buy USD
For #1, additional asset purchases would be a surprise to the market and would be a negative for the US dollar.
For #2, this is what the market is expecting and will bring profit taking on long EUR/short USD positions.
I think the biggest move will come from #1 and there isn't a lot of downside risk for #2.
This is a short term trade based on the FOMC doing more asset purchases. If the central bank doesn’t act, don’t have this on.
Trade: Buy EUR/Sell USD
There are several outcome variations on the meeting, from the announcement at 1PM ET to the forecasts at 2PM ET to the presser Bernanke gives at 2:15 PM ET. All have the potential to cause strong movements in the EUR/USD, but the dominant action will be driven by what the Fed does and not what they say they will do. A surprise add to QE will drive down the value of the US dollar.
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