The US Dollar rallied strongly during the FOMC statement on Wednesday. The Federal Reserve (FED) remained confident in the US economic recovery, which greatly benefited the USD against a wide range of currencies. The FED did not imply any potential delay in previous communicated dates and plans, thereby keeping its path on the completion of Quantitative Easing part 3 and a potential interest rate hike sometime next year. Whether the FED indeed will move forward with a rate hike remains to be seen but the contrast with the Euro zone, which is heavily struggling with its economy and contemplating loosening of policies, is striking.
The EURUSD plunged almost 200 pips in a free fall from 1.277 down to 1.2580. The currency pair thereby turned the weekly candle back into bearish territory for the week but it did not manage to break the bigger daily bottom at 1.25. Considering the bearish momentum, a continuation of the EURUSD downtrend seems likely for November but a confirmation of the bigger trend primarily occurs when price is below 1.25 with a target of 1.2170 – 1.20 zone (red circle). Any long-term short with a stop loss above the daily high of Wednesday (1.2770) should be able to capitalize on the potential breakout below 1.25. Another approach could be to wait for the break of support and trade smaller pieces of price action down to target.
The GBPUSD was heavily struggling with its downtrend and even had a potential inverted head and shoulders chart pattern forming on the daily chart. Price has not managed to break the neckline and yesterday’s FOMC statement catapulted the Cable back into a bearish vibe with a strong bearish daily candle. The target for the moment is -27.2 target at 1.5750. A retracement next week of this week’s weekly candle (38.2/50%) could be an interesting bearish entry spot (stop loss above the weekly high).
Last but not least, the USDJPY also had a bullish daily candle and is bouncing strongly after the 500 pip retracement from the 110 level. The same analysis as mentioned for EU and GU is valid for this pair with the difference that the USDJPY has less space before it hits a major -27.2 target at 111. The limited space between current price and the 110 resistance, and between 110 and 111 target means that only smaller intra-week or intra-day trade setups makes sense for this pair. That would certainly be different if price manages to break above 111. Like the GU a potential setup could be the retracement of this week’s weekly candle.
This wraps up the update on the majors after Wednesday’s FOMC statement.
Make sure to drop a note down below with your analysis and key confirmation levels. What is your view on the EURUSD, GBPUSD and USDJPY? Has the price action changed your view on the markets and in which why? What levels need to be broken before your analysis is confirmed? What trade setups do you have in mind? Remember, the more interaction, the quicker the learning curve is so don’t forget to leave a comment 🙂
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