The United States Federal Reserve has done as was widely expected and ended it's extraordinary bond buying program, it also upgraded it's view of the employment situation in the US. All of this means that our continued call for a strong US Dollar continues to be in effect, and the Euro and Yen will continue to suffer as a result.
The huge rally in the US Dollar since this summer was sparked by market expectations of the Fed tapering off extraordinary bond buying purchases due to an improving employment situation in the US. FOMC statements began hinting at moving an interest rate hike closer to the beginning of 2015. What a change did the self-inflicted recession in Germany and in greater Europe cause in a matter of just 3 months, after crippling sanctions were imposed on Russia.
The dive into recession was so quick, that all bets have been taken off for any rate hikes well past 2015. The damage to Europe’s economy has been deep enough to slow down the rally in US stocks, and keep the Fed on hold for longer.
Well, the Fed has tapered. Quantitative easing is over. What next?
Since our last call for 1.2740 and 1.2815 played out perfectly, after a much needed correction we're ready to call out new downside targets. The first one is 1.2530 which the market could reach early in November. This level will be in play as long as EUR/USD stays under 1.2695.
Daily Chart of EUR/USD
Expect some consolidation in a broad range between 1.2530 and 1.2610. Further into the end of the year, there is a possibility that we test even lower than 1.25 - all the way to 1.2430.
The information provided is for educational purposes only and should not be considered as investment advice.