The DXY’s (US Dollar Index) rally faded after the FOMC (Federal Open Market Committee). Closing price-action confirmed follow-through from Tuesday’s bearish engulfment pattern. The latest consolidation break-down has now directed dollar bears towards key trendline support near the 76 handle. A decisive close above the 20-day MA at 77.20 is required to stabilize the current bout of selling pressure.
The Yen was the clear loser of the day, prompting intervention rumors by the MOF (Ministry of Finance). The USD/JPY accelerated through stops after confirming a higher low above Tuesday’s high. Clearing the 20-day MA is the next obstacle and doing so would expose the key JPY82 region. Only above this key pivot suggests a more meaningful rally is in store.
The EUR/USD continues to extend gains since breaking out of a triangular consolidation pattern. From an Elliot wave perspective, the completion of the corrective fourth wave has now triggered the terminal fifth wave. While EUR1.4186 is a significant technical level, it is too early to determine whether the fifth wave extension will be a mere throw-over.
In the meantime, the currency markets will have to keep an eye on the S&P 500. The index is nearing a confluence of Fibonacci levels in the 1202/1203 region. A rejection at this pivot could set the stage for the DXY to complete impulsive weakness.
