Wednesday was all about the FOMC, which didn’t turn out as stock traders had expected. Nothing bad happened and the FED will keep printing money but market participants got addicted to more and more stimulus that the lack of an increase in stimulus was taken as a negative factor. Or maybe that’s just an excuse for a correction? Either way, stocks will probably continue going higher. The monetary stimulus isn’t going anywhere anytime soon but the situation for the US dollar can be quite different. Here, we can sense a bigger correction underway.
To describe the situation of the dollar, let’s start with the Dollar Index, which on Tuesday broke crucial horizontal support, which in theory brought us a proper sell signal. Wednesday, on the other hand, brought us a reversal above that support and as a consequence, a false breakout pattern. Those, often result in a movement in the opposite direction, in this case it would be an upswing. Sentiment for the USD is now definitely positive.
The EUR/USD is pretty much the same but reversed. Here, the price made a false bullish breakout above the important horizontal resistance of 1.19. That gives us a signal to sell with the potential target being at 1.17
The GBP/USD is also giving a sell signal. Here it also comes from the false breakout above the crucial horizontal resistance of 1.32. In addition to the breakout itself, we see a bearish engulfing candlestick pattern and a double top formation too with a potential target being the long-term up trendline. Sentiment is negative.
