EUR USD Declines after Weak Fed Economic Assessment

The EUR USD finished higher after reversing earlier weaknessfollowing a weak assessment of the U.S. economy by the Federal OpenMarket Committee.

The EUR USD finished higher after reversing earlier weaknessfollowing a weak assessment of the U.S. economy by the Federal OpenMarket Committee.

Federal Reserve officials downgraded their outlook for theeconomy, saying that the recovery was “proceeding”, not strengthening as theyhad said in their previous FOMC policy statement in April. The change in thestatement indicates that there was less then favorable data reported since thecommittee last met.

In addition to the change in the view of the economy, theFed left the target federal funds rate at the current range of zero to 0.25%and reiterated that interest rates will remain low for an extended period.Policymakers put some blame on the slowdown in the economy on the European debtcrisis.

The late session break in the Dollar against the Euroreversed earlier bullishness. At the mid-session, the Greenback was tradingmixed against most currencies. Trading was light, but the Dollar did get a boostfollowing a plunge in the U.S.housing market. Gains probably would have been greater if volume was at averagelevels.

Early during the session the EUR USD broke after a reportshowing a drop in new U.S.home sales weighed heavily on higher risk assets. Traders looked for safety inthe Dollar as the report indicated a still weak U.S. economy and the possibility ofa double-dip recession in the housing market.

At the mid-session, the Euro was nearing a key retracementzone at 1.2174 to 1.2102 but never quite reached this level. The turnaround inthe Euro suggests that a secondary higher bottom may be forming which indicatesbuyers may be trying to wrestle the trend away from the sellers.

Although a break into the retracement zone is stillpossible, upside momentum indicates that the market may make a run at the lastswing top at 1.2467. This breakout move will set up a further rally into amajor downtrending Gann angle formation at 1.2609.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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