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The euro has moved sharply higher against the U.S dollar, hitting 1.1840, following the FOMC monetary policy decision on Wednesday. The Federal Reserve hiked U.S rates 0.25 basis points as expected, however the greenback reacted negatively to FOMC Members Kashkari and Evans dissenting, and voting to leave rates unchanged. The EURUSD currently trades close to the 1.1830 level, with strong euro dip buying demand seen in the market. Traders now turn their focus to the European Central Bank monetary policy meeting this afternoon.

The EURUSD pair remains intraday bullish while price-action trades above the 1.1790 level, upside resistance is now found at the 1.1860 and the 1.1890 technical levels.

Should the EURUSD pair start to move below the 1.1790 level, intraday sellers may start to target towards the 1.1770 support level.

On Wednesday, as expected, the Fed raised the interest rates by a quarter of a percentage point and forecasted three more hikes in the coming year. As expected, Minneapolis Fed President, Neel Kashkari and Chicago Fed's Charles Evans dissented, preferring to leave the rates unchanged.

At the same time, we heard Yellen's final statement as the Fed chair where she reflected on her tenure and her successes in containing inflation and lowering the unemployment rate.

The focus now shifts to today's statements from the SNB, ECB, and BoE.

The SNB will announce its base interest rate decision at 8:30 am (GMT). Traders expect the committee to leave rates unchanged at -0.75%. They also expect the SNB to provide the inflation expectations for the coming year.

At noon, the BoE is expected to leave interest rates unchanged at 0.5%. Remember, in the October meeting, the BoE raised the rates for the first time in 10 years. While traders will watch the interest rate decision closely, they will pay a closer attention to Carney's statement. This is because yesterday, it was announced that inflation soared to 3.1% led by air fares and computer games. As a rule, Carney will have to write a letter to Phillip Hammond explaining the sudden rise in consumer prices.

At 12:45 PM, the ECB will release its interest rate decision with analysts expecting the committee to leave rates unchanged. They also expect the bank's deposit facility rate to remain at -0.4%.

Traders will pay close attention to the ECB statement and inflation guidance for 2018 and 2019. In the October meeting, the ECB decided to continue with the quantitative easing program until September 2018, leaving room for an extension. From January through to September, the monthly purchases will be reduced into £30 billion.

Furthermore, traders will listen to Draghi's comments on the deposit facility which has become a thorny issue in some countries like Germany. A negative deposit facility means that instead of the ECB paying banks an interest in deposits, the banks pay a fee. This has raised concerns about the bank's profitability though Draghi played down the fears during a speech at the Peterson Institute.

Traders will also watch out for Canada's Central Bank Governor speech at 5:35 PM.

While eyes remain on the three central banks, traders will also watch out for Australia's employment change data that comes out at 12:30 AM. Traders expect the Australian economy to add 19K jobs in November. They will also watch out for industrial production data from China which will be released at 2 AM. They expect the YoY manufacturing to grow by 6.2%.

At 8:30 AM, the German manufacturing and services PMI will be released with traders expecting a reading of 62.2 and 54.7 respectively.

At 9:00 AM, the EAI will release its monthly report which will show the demand and supply situation particularly in crude oil. This will come less than a month after OPEC and Russia committed to production cuts.

Other relevant data expected today are the retail sales in the U.K and Japan's manufacturing and non-manufacturing index.

EUR/GBP

Today's data releases and the expected statements from the ECB and BoE will be at play for this pair. Yesterday, the pair rose, fell, and then fell again after disappointing employment and inflation data. The only silver lining for the cable was the wages that showed some improvement.

The main points to watch today will be: 0.8819 to the upside and 0.8774 to the downside as shown below.

CAD/CHF

The short-term downside movement that started on Wednesday last week continued yesterday with the pair falling to a week's low of 0.7654. Today's statement by Canadian Central Bank governor and the expected SNB statement could help bring some more activities on this pair.

With the RSI of 38 headed south, there could be some more downward movements on the pair. As shown below, the RSI has been quite accurate in predicting the pair's short-term movements.

EUR/USD

The dollar eased yesterday after the decision by the Fed which was already priced-in. Yellen's statement did not help either. Today's major factor will be Draghi's statement that comes at 1:30 PM.

The main points to watch out for are 1.17169 to the downside. On the upside, the chart could reach 1.1792 or even 1.1811.

Daily Pivots: (S1) 150.44; (P) 150.97; (R1) 151.49; More...

GBP/JPY's corrective fall from 153.39 is still in progress and intraday bias remains neutral. As long as 149.74 support holds, outlook remains bullish in the cross. Break of 153.39 will resume the medium term up trend and target 61.8% projection of 139.29 to 152.82 from 146.96 at 155.32. However, break of 149.74 will dampen our bullish view and turn bias back to the downside for 146.96 key support instead.

In the bigger picture, current development suggests that medium term rise from 122.36 is resuming. Sustained trading above 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 146.96 support will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

Daily Pivots: (S1) 132.82; (P) 133.08; (R1) 133.35; More....

EUR/JPY is still bounded in range of 131.16/134.48 and intraday bias remains neutral. Further rise is expected as long as 131.16 support holds. Decisive break of 134.48 will resume medium term rise from 114.84 and target 141.04 resistance next. However, sustained break of 131.16 support will now indicate near term trend reversal and turn outlook bearish for 127.55 key support.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). Sustained break of 61.8% retracement of 149.76 to 109.03 at 134.20 will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will suggest medium term topping and will turn outlook bearish for deeper fall back to 114.84/124.08 support zone at least.

No change in QE and rates
We may get more info on specifics of tapering
Higher inflation forecast
Less dovish stance and possibility higher move in Euro

The big announcement was made during the European Central Bank's (ECB) last meeting but it would be naive to underestimate the power of the central bank. The European central bank will announce its monetary policy on Thursday and investors will get more flavour for the ECB's plan to scale back on it's asset purchase program. The market is widely expecting that there will be no change on their policy and the bank will remain dovish in their language. We reason this is where investors are largely underestimating the president of the European Central Bank, Mario Draghi. We do anticipate that Draghi is going to surprise the market on Thursday and his stance may actually rattle the forex market as the year ends. The ECB may not emphasize on the link of it's tapering process and inflation situation, and rather pay more attention to the stellar economic progress throughout this year in the eurozone. The bank may sound more optimistic towards it's inflation due to the improving labour and economic conditions.

The European Central bank is likely to sound less dovish on Thursday while the market is largely expecting that the bank would be rather dovish with it's approach. Thus, there is a clear scope for the euro to move higher as the market gets a surprise when Draghi takes the stage. The Euro-dollar pair has the potential to touch the 1.20 mark on Thursday and the bond yields could pop significantly. The euro currency without any doubt has been the best performer among major currencies this year and a surprise by the ECB could make the Christmas for the euro bulls even better. The currency has the potential to move well above the 1.20 mark in 2019, because the market hasn't priced in the prospects of the ECB increasing the interest rates. The option markets clearly shows that the risk reversals trading is skewed in favour of call contracts.

If something which is going to keep Draghi tamed on Thursday it will be the weakness in the wage growth. The bank's inflation forecast and the actual number has been out of sync. The monetary policy has failed to produce the kind of spark in inflation which the ECB was expecting. The ECB is closely monitoring the pay rise in the largest economy of the eurozone, Germany. The real wage growth index has grown at the slowest pace this year since 2014 and it is mainly due to the lack of rise in pay demand.

NZDUSD (0.7004): The New Zealand dollar managed to break past the 0.6891 level of resistance with price action maintaining the bullish momentum. Any retracements could be seen falling back to this level to establish support. To the upside, the next target for NZDUSD comes in at 0.7062 where the next main resistance level remains to be tested. In the event that NZDUSD slips back below the 0.6891 support level, we could expect to see the declines retesting the previous lower support at 0.6907.

USDJPY (112.62): The USDJPY posted strong declines yesterday as the U.S. dollar fell to a four day low. On the 4-hour chart, price closed below the support level of 113.00 - 112.90. Any short term retracement will see price retesting this level to establish support. To the downside, USDJPY could be seen pushing lower to test the next support formed at 112.04. Alternately, in the event that USDJPY manages to break past the 113.00 level, we can expect to see the bullish momentum resuming. However, it is unlikely as USDJPY could be seen maintaining a sideways range within 113.00 and 112.04.

EURUSD (1.1836): The EURUSD rallied to close at a five day high yesterday following the FOMC meeting. The reversal near the 1.1730 level of support could potentially point to a head and shoulders pattern that is currently forming. If we expect to see a reversal resulting in the right shoulder, then we can expect further declines in EURUSD on a break down below 1.1730 neckline support. On the 4-hour chart, price action has hit the resistance level area of 1.1843 - 1.1822. Further gains can be expected only on a close above this level.

USD/CHF - 0.9865

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9853

Kijun-Sen level                    : 0.9885

Ichimoku cloud top                 : 0.9913

Ichimoku cloud bottom              : 0.9909

Original strategy :

Bought at 0.9860, Target: 0.9970, Stop: 0.9825

Position : - Long at 0.9860

Target :  - 0.9970

Stop : - 0.9825

New strategy  :

Exit long entered at 0.9860,

Position : - Long at 0.9860

Target :  -

Stop : -

Dollar’s overnight post-Fed selloff dampened our bullishness and suggests near term downside risk remains for the fall from 0.9978 top to bring retracement of recent rise, below 0.9840 would extend weakness to 0.9820, then towards 0.9790-95, having said that, near term oversold condition should limit downside and price should stay above 0.9755-60, bring rebound later.

In view of this, would be prudent to exit long entered at 0.9860 and stand aside in the meantime. Above the Kijun-Sen (now at 0.9885) would bring rebound to 0.9910-15 but only break of resistance at 0.9936 would revive bullishness and signal low is formed instead, bring further gain to 0.9950-60 first. 

GBP/USD - 1.3433

Most recent candlesticks pattern   : N/A

Trend                                 : Sideways

Tenkan-Sen level                 : 1.3428

Kijun-Sen level                    : 1.3380

Ichimoku cloud top              : 1.3368

Ichimoku cloud bottom        : 1.3333

New strategy  :

Buy at 1.3350, Target: 1.3450, Stop: 1.3315

Position : -

Target :  -

Stop : -

As cable found good support at 1.3303 earlier this week and has staged a strong rebound, suggest low has been made there and consolidation with mild upside bias is seen for this rebound from 1.3303 to extend gain to 1.3475-80, then 1.3500, however, near term overbought condition would limit upside and price should falter below indicated resistance at 1.3432, bring another decline later.

In view of this, we are looking to buy cable on dips as 1.3345-50 should limit downside. Below 1.3320-25 would defer and suggest the rebound from 1.3303 has ended, bring retest of this level first, break there would extend the fall from 1.3550 top to 1.3280 and later 1.3250 but price should stay well above previous support at 1.3221.