EURUSD Comes Back Inside of the Channel Down Formation

The Fed’s rate decision, it’s statement and the following press conference always make for great market movement, delivering a huge dose of volatility and momentum. Interestingly, very often in both directions.

Yesterday, the Fed did not disappoint, delivering 75bp rise. The first reaction and the ensuing statement were bullish for stocks and negative for the USD.

That changed dramatically, when Jerome Powell started expressing his vision on the markets. Apparently, the Fed is about to be more hawkish than initially expected, killing all expectations of a potential pivot.

The markets reacted rapidly with the strengthening of the USD and a reversal on stocks. The latter was more or less expected considering the recent gains. Optimists can still treat it as take profit action.

In this analysis, I will focus on the EURUSD, which, unlike the Fed, made an important pivot. The EURUSD came back inside the big channel down formation (green lines), which has been a dominant formation for the EURSD over the past months.

The end of October brought us a breakout to the upside, but we can treat that now as a false breakout (yellow), which actually strengthened the bearish narrative.

The EURUSD also broke the mid-term dynamic support (lower blue), which clears all the important supports in the area. The EURUSD could remain in freefall until the price finds the lower line of the channel down formation, which at this point…is really far.