FOMC Impact on USD

Hello Forex Traders,

Wednesday’s FOMC statement, projections and press conference created a ton of volatility in price movement on the lower time frames. On the EURUSD for instance a classical down, up, then down again scenario unfolded. And these swings were certainly no small movers: price moved tens of pips within moment.

The FED’s decision to start the tapering NOW, not sooner or later, not in beginning 2014 or summer 2014, of course sending a signal of potential strength of the US economy in 2014. Moreover, less Quantitative Easing (QE) means less Dollars in circulation and potentially more value for every current US Dollar. Could this be the start of a US Dollar uptrend? Let’s take a look!

EURUSD

The FOMC volatility pushed price above the consolidation zone (magenta line) but only for a split second, after which price closed and reversed.

19- 12- 2013 eu

Failure to break top

This upside break made the EURUSD challenge the yearly high and top at 1.3830 but ultimately failed to break above that resistance level. The move down is now right at the bottom of the uptrend channel (blue) but the drop in price has been very impulsive so far.

Uptrend channel support?

Will the uptrend channel be able to contain price or will the momentum be strong enough to break the channel? Or will the holiday season mentality kick in and the market slowly turns choppy? The best answer could be to wait and see, and let the market tell us.

19- 12- 2013 eu 2

Break of channel

A break of the uptrend channel could be the reversal signal for the EURUSD and the fall could go far. Technically speaking, the EURUSD could have ended a correction of the weekly chart at this level and the year of 2014 could be the recovery of the U.S. Dollar. However, the currency pair is still in an uptrend and there are layers of support spread from 1.33 to 1.3650.

1)      Any bearishness would need to push through that, after which a fall could commence to 1.31, 1.29, and then 1.2750.

2)      The lack of price to break could mean uptrend continuation up to 1.43 and maybe the next tapering would be sufficient for a turnaround of the EURUSD trend.

USDCHF

19- 12- 2013 uc

The Dollar Swissy is obviously in a down trend as price is simply showing lower lows and lower highs. But the lows are closer to each other than the highs and that means that price is showing a potential falling wedge pattern.

A falling wedge is a potential reversal signal, which in this case means a bullish signal. The first confirmation would be a break above the wedge (magenta).

From a weekly perspective price is now bouncing off of the 78.6% Fibonacci retracement. This could become the turning point for a reversal on the USDCHF.

19- 12- 2013 uc 2

Bullish scenario would need a break above the magenta trend line, then orange trend line, and then a continuation towards the -61.8% targets at 1.07-1.08 is in play.

Bearish scenario would mean that price could retrace down lower to the 88.6% Fib at 0.8730 and the support at 0.8570.

What do you think will happen with the US Dollar? Let us know down below!

Thanks for sharing and Good Trading!

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