- SWFX market sentiment is 56% bearish
- 64% of pending orders in 100-pip range are set to SELL
- 57% of traders remain bullish on the Dollar
- Upcoming Events: US Unemployment Claims and Philly Fed Manufacturing Index, ECB Draghi speech
A decision of the Fed to start reducing the size of its $4.5 trillion asset portfolio led to breakout from the rising wedge pattern and resulted in 125 pips appreciation of the Greenback against the Euro just in one hour. As the pair has reached a combined support set up by the monthly PP and the bottom edge of a dominant ascending channel, a little rebound is expected to follow in the remaining two days of this trading week.
The Euro fell sharply against its American counterpart, following the Fed's announcement of its interest rate decision on Wednesday. The Euro dropped against the US Dollar by 0.91% or 109 base points to the 1.1903 mark, entering the area close the weekly low.
The two-day meeting of the Fed resulted in an overall agreement to keep interest rates unchanged at 1.25%, as widely anticipated. Despite lowered inflation forecasts, the FOMC still forecasted one more rate increase by the end of 2017 to sustain the US economic growth. The Central Bank also noted that it will start unwinding its balance sheet in October, while the market wanted it to wait and see how September's hurricanes affected the economy.
Another Draghi speech in focus
Although today the United States will publish an update on the number of people who filed for unemployment insurance as well release the latest Philly Fed Manufacturing Index, none of these events is expected to cause any notable volatility in the markets. But opening remarks at the European Systemic Risk Board annual conference that will be delivered by the ECB President Mario Draghi at 13:30 GMT, in turn, are likely to cause a quite intense trading that might result in rapid recovery of the Euro.
EUR/USD plunges amid FOMC statement
A decision of the Fed to start reducing the size of its $4.5 trillion asset portfolio caused a very high volatility in the markets, which resulted in 123 points appreciation of the Dollar against the Euro just in one hour. From technical perspective, this event signified a breakout of the pair from a rising wedge. Although the fall was sharp, it was stopped by a combined support formed by the monthly PP at 1.1881 together with the bottom trend-line of a dominant ascending channel. On the one hand, today the buck might make another attempt to break to the bottom, using the downside momentum from the yesterday's event. On the other hand, on a daily chart it looks like the rate formed a third reaction low yesterday and, for this reason, has to make a fully-fledged rebound.
Hourly Chart
Due to the Fed's decision previous trading session the pair closed in a red zone in the process forming a third reaction low for a dominant ascending channel. The fact that the pair slipped to the bottom edge of the pattern that is additionally protected by the monthly PP at 1.1881 suggests that a rebound is about to happen. On the other hand, there are signs of existence of an unconfirmed junior descending channel that theoretically might push the pair to the bottom. However, the end of this day will greatly depend on the content of Mario Draghi speech today at 13:30 GMT.
Daily Chart
Traders still bearish on the pair
The bearish market sentiment continues to dominate the market, as 56% of open positions are short. In the meantime, the outlook for the two currencies against the rest of the traded financial instruments is as follows. Euro is 61% bearish, while for the Dollar 57% bullish.
Traders of OANDA remain bearish, as 64% of open positions are short. Meanwhile, SAXO are also bearish on this currency pair with 61% of open short positions.
Spreads (avg, pip) / Trading volume / Volatility