Ahead of the possibility of a pause by the FOMC, the euro is perched right at its 1-year high at 1.2750, and poised to climb towards my next target zone near 1.2900-1.3000 upon hearing that U.S. interest rate policy may be less supportive of the dollar.  Looked at from the perspective of some high-profile market pundits, the final two years of the Bush Administration will orchestrate a dollar devaluation plan against Europe and Asia to help redress its lopsided and unhealthy Balance of Trade and Current Account problems, not to mention its growing national debt issue.  Some folks even think that the major industrial leaders already have discussed a second Plaza Accord, which during the Reagan Administration, the G-7 coordinated a plan to weaken the dollar versus the yen and Deutsch mark to redress its trade imbalance.  The dollar plunged 50% after the Plaza Accord, which required another accord to stop it from falling.  Based on the enclosed weekly chart, if the euro hurdles and sustains above 1.3000, we should expect it to retest the December 2005 high at 1.3660.

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.