Eyes on FOMC While there are a number of economic indicator scheduled to be released today, the focus will no doubt be the FOMC meeting. Even though it's widely expected the Fed will raise interest rate again, the 13th consecutive increase, by 0.25% to 4.25%, focus is on the anticipated change of language in Fed's accompanying statement. 'Accommodative' suggested that borrowing costs to be kept cheap for stimulating the economy. Stop of this word will indicate that rates are now close to neutral from Fed's point of view. Meanwhile, 'measured' has been used and were usually right about its implication, another quarter-point rate increase at the next meeting.
However, just like other major events, the most important thing is how market perceive these changes and how they're reflected in the price chart. Market has been expecting changes since Nov FOMC for 'several aspects of the statement language would have to be changed before long, particularly those related to the characterization of and outlook for policy.' A 'no change' this time will very likely provide support for the dollar for a strong rebound. However, even if there are changes, will they fuel further dollar selloff remains to be seen. These factor could have been well discounted in the market already and traders should be careful about being caught in some classic 'buy on rumors, sell on news trap'.
Meanwhile, the ZEW Center for European Economic Research's gauge of investor and analyst confidence is expected to rise to 40.5 in December from 38.7 previously. U.S. retail sales is expected to have risen by 0.4% last month. EUR/USD EUR/USD's strong rally yesterday has pushed it to as high as 1.1979 before turning into mild sideway consolidation. At this point, as long as EUR/USD stays above cluster support of 1.1929 (23.6% retracement of 1.1762 to 1.1979 at 1.1928) rally is still in progress for mentioned upside target of cluster resistance of 38.2% retracement of 1.2587 to 1.1641 at 1.2002 and 161.8% projection of 1.1703 to 1.1847 from 1.1762 at 1.1995. Touching of 1.1929 will turn intraday outlook consolidative first and risk pull back further towards 38.2% retracement at 1.1896 (previous resistance at 1.1900) but EUR/USD should be supported there for at least one more rise.
As discussed before, the current rebound from 1.1659 is being treated as a correction to the whole decline from 1.2587. 1.2000 level could be presenting both a technical and psychological resistance to immediate further rise. Also, EUR/USD will be meeting longer term trend line resistance (from 1.3483 to 1.2587 and now at 1.2070). We'll need to pay attention to any sign of loss of upside momentum when EUR/USD gets near to these levels. And a firm break below 1.1896 will be a warning that rebound could have already finished.
But still a break above will further add evidence to underlying strength in EUR/USD and could lead to further rally towards 50% retracement of 1.2587 to 1.1641 at 1.2114 or even further to 1.2171 resistance.
GBP/USD Cable's rally continued to as high as 1.7777 before turning into mild sideway consolidation. At this point, as long as cable stays above cluster support of 1.7662 (23.6% retracement of 1.7291 to 1.7777 at 1.7662), rally is still in progress for mentioned upside target of resistance zone of 1.7902 resistance (with 61.8% retracement of 1.8498 to 1.7047 at 1.7944 and longer term falling trend line (from 1.9219 to 1.8498, now at 1.7973).
Touching of 1.7662 will turn intraday outlook consolidative first with risk of pullback towards 38.2% retracement at 1.7591 but downside should be supported there and bring rally resumption.
As discussed before, as the rebound from 1.7047 is treated as correction to the fall from 1.8498, attention will be paid when cable meets the above mentioned cluster resistance. Since the 3 wave structure of the fall from 1.8498 is still suggesting further decline to come after the current rebound. Any reversal from there could be steep and deep. A firm break below 1.7591 will be the first warning of such reversal.
However, a strong break above will add much evidence to the underlying bullishness in cable and we may see the rally the extend to 1.8498 high again in the coming weeks in such case.
USD/CHF USD/CHF's steep decline yesterday has pushed it to as low as 1.2858, touching 38.2% retracement of 1.2239 to 1.3283 at 1.2884 and is still struggling there. At this point, as long as minor resistance of 1.2936 holds, decline is still in progress for next downside target of 1.2695 support and possibly the longer term rising trend line (from 1.1481 to 1.2239, now at 1.2669). Meanwhile, touching of 1.2936 will turn outlook consolidative first but short term bearishness remains as long as 1.3018 resistance holds.
But still, as the current fall from 1.3283 is being treated as a correction to whole rally from 1.2239. Attention will be paid to any sign of loss of downside momentum which could lead to strong rebound. Breaking of 1.3018 will be the first warning of such reversal.
Meanwhile, a strong break below the mentioned trend line will add much evidence to underlying weakness in USD/CHF which could possibly lead to even steeper fall to 1.2239 low again in the coming weeks.
USD/JPY USD/JPY's weakness continued to as low as 119.52 before turning into mild sideway consolidation. As 119.93 and mentioned lower channel line was broken, further evidence is added too support the case that an important near term top is made at 121.38. At this point, as long as cluster resistance of 120.10 (38.2% retracement of 121.05 to 119.52 at 120.10) holds, the fall from 121.05 remains in progress for next downside target of support zone between 118.18 and 118.40 (with 23.6% retracement of 108.75 to 121.38 at 118.40).
Also, as discussed before, USD/JPY has just retreated from an important resistance zone with 100% projection of 101.65 to 113.74 from 108.75 at 120.84, long term pattern resistance at 120.71 and long term falling trend line (from 147.68, 1998 year high to 135.20, 2002 year high) which is now sitting at 121.35. ). And touching of 118.18/40 support zone will indicate the rally from 108.75 has finally ended and USD/JPY will at least turn into consolidative trading with chances of a deeper sell off.
Meanwhile, touching of 120.10 will turn intraday outlook consolidative with risk of recovery towards 120.40 resistance but as long as this level holds, short term bearishness remains. Any rebound that push USD/JPY above 120.40 resistance again will indicate USD/JPY is still being bounded within sideway consolidation within established range below 121.38.
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