After the FOMC statement and press conference, the USD gained across the board and the EUR/USD fell below a consolidation pattern, as well as to a fresh low on the year at 1.2834.
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However, as it was not a hawkish statement, the market was conservative with the USD-strength. EUR/USD rallied from 1.2834 back above 1.29 in the 9/18 US session. As EUR/USD rallies, we should expect sellers in the 1.2930 area.
1) The 200-, 100-, and 50-hour simple moving averages reside around 1.2930.
2) There is a previous support area around 1.2940.
3) If the market is going to maintain yesterday’s bearish momentum, the 1H RSI should hold below 60. It is currently tagging 60 as price tags 1.2920.
A break back above 1.2950 is a sign that the FOMC-reaction may have been an exhaustion push. Then, if price can break above 1.30, we can start considering a bullish correction scenario especially if price starts to hold above 1.29 after a subsequent pullback.
However, let’s say that 1.2930-40 area holds as resistance. The EUR/USD’s bearish trend would be intact, and there is still further downside toward the 1.2750-1.28 area, which represents the 2013-lows as you can see in the weekly chart.
We can also see that the 61.8% fibonacci retracement level (of the 1.2042-1.3993 rally) is at 1.2787. So, we do have some room to fall, but we should respect the support factors around this 1.2750-1.28 area especially as the weekly RSI shows oversold condition.
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Next week, ECB governor, Mario Draghi will speak on Monday before the European Parliament’s Economic and Monetary Committee and Brussels. We will also get manufacturing and services PMI data on Tuesday. Business climate data will also be released next week.
The main focus will be on Draghi’s assessment of the central bank’s current stimulus measures and weather it plans to implement more. We should expect some support if EUR/USD approaches 1.28, but whether there will be a bullish correction will depend on weather Draghi hints are more QE. If he does, EUR/USD might remain pressured towards 1.2750 and maybe even lower.
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