The US Dollar rallied on Wednesday after the FOMC statement and press conference was held. The Federal Reserve (FED) will end the quantitative easing in October but will leave any decision for an interest rate hike dependant on data and not based on a predetermined date. The full FOMC phrase states:
“The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.”
The conclusion is that the FED will end the quantitative easing but it is in no rush to hike interest rates any time soon (the phrase “for a considerable time” was not removed). The net impact however was US Dollar bullish – let’s review the technicals.
The US strength gave the EURUSD sufficient momentum for its downtrend to continue yet another time. The channel (magenta trend lines) turned out be a bear flag chart pattern and the break of the bottom trend line was the signal for a bearish impulse. The break does not look like a false break as there are multiple 4 hour candles below support and no rejection wicks. Also the daily candle closed near the yesterday’s low (bears in control). Therefore I am targeting 1.2750 for my short because it is equal to the bigger weekly bottom (and potential support).
The Cable did not react to the FOMC statement as much as the other currency pairs. This inaction is most likely due to the Scottish referendum on independence Thursday, which leaves the GBP vulnerable to the release of the outcome on Friday morning (UK time).
The AUDUSD has a big bearish daily candle just like the EURUSD. In fact yesterday’s candle was a candle stick pattern: big bearish engulfing twins dominate the chart. The Aussie is continuing its breakout of the range (blue and purple lines) with lots of momentum AND it still has plenty of space until the bigger monthly bottom at +/- 0.8660 is reached (green line).
Although the Loonie had a hefty (bearish) pullback during this week’s trading, price did manage to recover and bounce back up during FOMC. The daily candle is suspiciously looking like a daily pinbar. The next target should be the -61.8 Fibonacci level after the pair bounced at the 50 Fib retracement and -27.2 Fib target.
The USDJPY steams forward as it races to higher and higher levels breaking resistance after resistance. Not only the US Dollar strength is fueling the bullishness on the USDJPY pair but also Yen weakness (EURJPY and GBPJPY are also strengthening). The bullish momentum is strong as each daily candle seems to be bigger than the next. The best is to look for bull flag chart patterns on the 1 hour chart because once the Yen starts to trend it does not tend to retrace deeply. Be careful though of the 110 psychological resistance level. Read more about previous articles how to trade the USDJPY break: here and here.
The Kiwi also fell as a brick during yesterday’s trading but the pair does have substantial support just below it. Although the bearish fall resembles a straight arrow so far, the Kiwi could see some struggle at the 0.8050 monthly bottom and 0.8000 psychological round figure.
Which USD pair has worked out the best for you so far? Hope that the USD trend warning which was posted on July 24th helped you with catching some pips.
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