HomeContributorsTechnical AnalysisUS Dollar Sinks After Rate Increase To 1%

US Dollar Sinks After Rate Increase To 1%

Currency pair EUR/USD

Investors and traders were looking for a direction from the Federal Reserve (Fed) yesterday regarding the potential path of interest rate hikes during 2017. The Fed indicated that it expects 3 rate hikes during 2017, which seems to match expectations of the market.

Despite the interest rate increase from 0.75% to 1%, the US Dollar declined against other major currencies. The rate increase seemed to have already been priced. Another contributing factor was the lack of an even stronger hawkish tone (more rate hikes) in the meeting minutes from the Fed.

The EUR/USD found support after the Fed news event, which has been labelled as a wave B (blue) in a larger ABC (blue) correction. The wave 2 (purple) is now approaching a key 78.6% Fibonacci resistance level. A break above the 100% level remains the invalidation point for the larger daily bearish trend.

Currency pair GBP/USD

The GBP/USD also showed a bullish bounce just as the EUR/USD. Price has now reached a potential resistance zone with Fibs and a trend line (orange). A break above the 61.8% makes a wave 4 (blue) unlikely.

The GBP/USD broke above resistance (dotted red) and invalidated yesterday’s wave 4. A larger ABC (pink) zigzag seems to be taking place. A break below the support lines (blue/green) could indicate a bearish breakout but for the moment one more push higher is possible within wave 4-5 (purple).

Currency pair USD/JPY

The USD/JPY seems to have completed a wave 4 (purple) at a shallow Fibonacci level from the daily-weekly charts, which makes a larger uptrend more likely. The uptrend stays intact if price manages to stay above the 100% Fibonacci level of wave 2 (blue/brown).

The USD/JPY broke below the support trend line (dotted green) and expanded the bearish correction.

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