USD Gains After FOMC Except Against the JPY

USD Gains After FOMC Except Against the JPY

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Despite low inflation and other central banks going dovish, cutting rates, and increasing stimulus, the FOMC provided a positive assessment of the economic recovery. This suggests that mid-2015 is still the projected time-line for the rate hike. The slightly hawkish statement is giving the USD a boost across the board, but not against the JPY.

EUR/USD was consolidating ahead of the FOMC meeting, but held at 1.14. Today, after the announcement, it is falling below 1.13 and looks poised to continue the prevailing downtrend. If price fails to push back below 1.12-1.1225 area, then we should expect some further consolidation, bullihs correction. Otherwise, the pressure will now be back on the 1.11-1.1150 area, with the risk of falling further towards the 1.10 handle.
eurusd 1h chart 1/28
EUR/USD 1H Chart 1/28 (click to enlarge)

The GBP/USD also fell after a bullish correction from 1.4950 to about 1.5220. The 1H chart shows that the pair has completed a double bottom and is threatening to break this week’s rising trendline. The next key level will be around the 1.5050 area, which represents a support/resistance pivot area as well as the lower bound of the middle area of this week’s range. If the GBP/USD is to defend against another bearish continuation attempt, the 1.5050 area should provide support. If price falls below that, the 1.4950 level will be in sight, with risk of breaking lower towards 1.49.
gbpusd 1h chart 1/29
GBP/USD 1H chart 1/28 (click to enlarge)

After a week of consolidating, the AUD/USD also looks ready for bearish continuation as it looks poised to test the 0.7858 support pivot with risk of breaking towards the 0.78 handle.
audusd 1h chart 1/28
AUD/USD 1H Chart 1/28 (click to enlarge)

USD/JPY however did not join the party. The Japanese was resilient against USD strength, and was even stronger today. The USD/JPY has been consolidating between 117.17 and 118.81. It was trading around the middle of the range, around 118 today, and fell lower after the FOMC meeting. It is now trading just above the consolidation range support at 117.17. With a hawkish FOMC, USD/JPY should probably hold above this support, or at least be supported after a clear-out swing below 117.17 and maybe even 117.00.

Now, if the 117.00 does break and a pullback still stays below 118, there would be pressure back towards the 115.56-116 support area.
usdjpy 1h chart 1/28
USD/JPY 1H Chart 1/28 (click to enlarge)

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About Fan Yang

Fan Yang has been a forex trader since 2007. He attained his Chartered Market Technician (CMT) designation in 2010 and continues to trade and serve the Forex community by sharing his market outlooks.

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