EUR/USD: 1.2985The Fed duly announced a 3rd round of quantitative easing today in a bid to assist the weakening US economy, where right on cue, the weeks jobless claims jumped sharply, up 15k on the week. Fed Chairman Bernanke went on to say that it would buy $40 billion of mortgage debt per month to keep borrowing rates low, starting on Friday, and would keep its benchmark interest rates "exceptionally low" until the middle of 2015.
He pointed out that the Fed would continue to buy bonds until the job market improves.
US stocks ( S+P + 1.6%) and commodities rose strongly, while the dollar hit new lows, with the Euro reaching 1.3000.
Most other news has been largely forgotten about today, although the Euro was partly held in check by the IMF announcing that Greece is going to need a 3rd bailout and needs to get its current state of affairs before that would even be thought about.
Everything else has been lost in the haze of QE3 today as the dollar took another hit, with the DXY (79.18) breaking important support and looking headed towards the May 1st, 78.60 low or possibly even the 50% Fibo retrace of 72.69/84.10 at 78.40.
The charts, in the short term are seriously overbought, although the dailies still point higher , which suggests some pretty volatile conditions with some nasty setbacks within the current dominant uptrend.
Having taken out the 1.3000 barrier, without yet actually following through on the topside, I suspect there will now be plenty of keen sellers at that level but a break would suggest progress towards 1.3075. Above here the charts become pretty messy but the next Fibo resistance is not to be found until 1.3137 (76.4% of 1.3483/1.2042) and more importantly at 1.3145 (38.2% of 1.4939/1.2042). Beyond there is the Fibo resistance at the major downtrend line from 1.4939 (4 May 2011), which currently lies at 1.3215. This may come under pressure next week given the current momentum, but will not be seen today.
The downside could have some nasty spikes, but given what has happened today looks, somewhat limited in the medium term. With the 4 hour charts (below) looking so overbought, I would imagine further upside in today's session might be somewhat limited and it may be that the market goes nowhere as it digests the impact of Bernanke's statement. The points to watch on the downside are at 1.2940 (minor), 1.2855 (session low) and then at 1.2776 (23.6% of 1.2042/1.3000).
It will be choppy and I suspect somewhat directionless today, so look for a range of 1.2950/1.3050 to cover it for the time being.
There is plenty of opportunity for volatility later on with both EU and US CPI data , and also US Reuter/Michigan Consumer Sentiment and Retail sales.
Stay flexible and keep stops suitably in place.
Good luck. Good w/e.!
