EUR/USD recap for 18.12.2015 and FED aftermath
And so the era of low rates and QEs has ended with the FED lifting by 0.25 to 0.50 its rates on 16.12.2015. The commitment is finally complete and this may lay out the way for more precise and confident forward-guidance from the feds and a better communication between them and the market. Now as rates are up and the system starts to adapt to the new change one indicator will be much more notable and that is - inflation. If inflation rises according to their plan into 2016 as well it will surely justify their decision for the liftoff, and will give them hope for the future and will determine their actions for the 2016 hikes as well. For now the best are 75% for a rate hike in July 2016.
Dollar lost ground in the early minutes after the news came in. As Janet Yellen shed more light in her speech and Q&A section, dollar quickly gained ground back and this continued in the next day. The Euro dropped 55 pips at first then from 1.08877 it jumped 127 pips to 1.10112. On the next hour mark, euro dropped with 85 pips to 1.08938 and confirmed that a movement bellow will continue. Dollar didn't believe Yellen at first, then market assimilation came in. Now the pair is trading between a range from 1.08045 and 1.08740. A brake at one of these levels will confirm its next directional move. Bets are for a continued dollar strength in 2016 as well, but I think that by the year-end, dollar will lose ground. End-year flows, Christmas and New Years will be the catalyst for knee jerks and sharp moves for quick profit takings. I would assume on the basis of this and that 1.08087 is a strong support for the euro and keeps the bears away, that euro will end around 1.09110 -240. But everything can change if the euro opens weaker after Sunday's Spain regional elections, finding a threat. As we know, the euro is susceptible to separatist actions and events like these put stress on the currency.
Act accordingly, trade safe and may the Force be with you... always!