By David Song, Currency Analyst U.S. Dollar: All Eyes On FOMC, Bernanke Press Conference In Focus Euro: Bearish Formation Continues To Take Shape, ECB Strikes Dovish Tone British Pound: 1Q U.K. GDP Disappoints, Look For Support At 1.6000 U.S. Dollar: All Eyes On FOMC, Bernanke Press Conference In Focus The greenback is regaining its footing ahead of the FOMC interest rate decision, with the Dow Jones-FXCM U.S. Dollar Index ( Ticker: USDOLLAR ) paring the overnight decline to 9,910, and the reserve currency may snap back during the North American trade should the Federal Reserve strike an improved outlook for the world’s largest economy. Beyond the rate decision at 16:30 GMT, we will be keeping a close eye on the updated forecast for growth and inflation at 18:00 GMT, but the press conference with Fed Chairman Ben Bernanke at 18:15 GMT could spark a sharp rally in the USD should the central bank head adopt a hawkish outlook for monetary policy. As Fed officials take note of the more robust recovery, the central bank may turn its attention to the stickiness in underlying inflation, and we may see the FOMC start to discuss a tentative exit strategy as the economy gets on a more sustainable path. As the Fed shifts gears, the shift in the policy outlook encourage a bullish forecast for the USD, and greenback should appreciate further going into May as the central bank moves away from its easing cycle. As the USDOLLAR continues to find support around 9,900, the index appears to be carving a floor for a move higher, and we are still looking for another run at the 78.6% Fibonacci retracement around 10,118 as interest rate expectations pick up. Euro: Bearish Formation Continues To Take Shape, ECB Strikes Dovish Tone The Euro extended the advance from the previous day to reach a fresh weekly high of 1.3235, but we are still bearish on the EURUSD as the pair remains stuck in the descending triangle carried over from earlier this year. As price action approaches the apex of the bearish formation, we should see interim support around 1.3000 give way, and the single currency should track lower throughout the year as the European Central Bank sticks to its easing cycle. Indeed, ECB President Mario Draghi struck a rather dovish tone while speaking in Brussels and said that the risks surrounding the region are ‘broadly balanced,’ and went onto say that ‘ underlying price pressures should remain modest ’ as the region faces a slowing recovery. In addition, the central bank head argued that ‘a ny exit strategy is premature given the current economic situation ,’ and it seems as though the Governing Council will embark on more easing as the governments operating under the single currency become increasingly reliant on monetary support. As the EURUSD struggles to hold above 1.3200, we should see the bearish formation continue to take shape, and we may see the pair fall back towards the 23.6% Fib from the 2009 high to the 2010 low around 1.2630-50 as it carves out a lower top in April. British Pound: 1Q U.K. GDP Disappoints, Look For Support At 1.6000 The British Pound slipped to an overnight low of 1.6080 as the 1Q GDP report for the U.K. fell short of market expectations, and we may see a short-term correction in the GBPUSD as the pair appears to be carving a short-term top ahead of 1.6200. However, as the pound-dollar maintains the upward trending channel from earlier this year, we should see former resistance around 1.6000 to act as new support, and we will preserve our bullish call for the sterling as the Bank of England turns its attention to the stickiness in core inflation. As the BoE scales back its dovish tone for monetary policy, a short-term pullback could set the stage for a larger move to the upside, and the GBPUSD we may see the sterling track higher throughout the year as the BoE looks to conclude its easing cycle. --- Written by David Song, Currency Analyst To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com. Will the EUR/USD Resume the Downward Trend From 2011? Join us in the Forum

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