EUR/USD and USD/JPY Poised to Continue Trends After FOMC

EUR/USD and USD/JPY Poised to Continue Trends After FOMC

This week, the key fundamental risk for the USD was the FOMC Decision/Statement/Press Conference. On Wednesday (12/17), the FOMC left rates unchanged, but did paint a rosier outlook for 2015, giving the market more affirmation that the committee will likely raise rates by mid-2015. The USD strengthened against the board. The EUR/USD and the USD/JPY have been in corrections ahead of the FOMC risk, and now a session later, both look poised for continuation of USD-strength.

EUR/USD 4H Chart 12/18
EUR/USD 4H Chart 1218
(click to enlarge)

The EUR/USD was consolidating since last week, climbing from a new low on the year at 1.2247 almost back to November’s high of 1.26. However, the market stalled even before the FOMC event.

Bearish Continuation Attempt: Afterwards ,the EUR/USD continued to fall, and is not approaching the 1.2247 low on the year. Now, if we get a squeeze, a bearish market should provide resistance in the 1.2375-1.24 area. , which includes some previous support levels and would hold EUR/USD under the 200-, 100-, and 50-period SMAs. If price instead pushes back above these SMAs ,and breaks above 1.2450, then we are likely back in consolidation mode, and will have to shelve the current bearish continuation outlook for fresh lows on the year, toward 1.22 for example.

USD/JPY was also in USD-correction last week, retreating from a high on the year at 121.84 down to 115.56 this week. After stalling and hanging around 117, the pair pushed higher after the FOMC event.

USD/JPY 4H Chart 12/18
FOMC 4h chart 12/18
(click to enlarge)

The rally broke above the recent consolidation resistance and above the 200-, 100-, and 50-period SMAs. As we got into the 12/18 US session, we saw another bullish push after a period of quiet consolidation. This is clearing the SMAs, and the USD/JPY now has to clear 120 as well as push the 4H RSI above 60 to show that the pair is indeed in bullish continuation mode.

At this point, a break below 117.00 would shelve this bullish outlook.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at