AUD/USD: 0.8860EUR/USD: 1.3685The Fed decided to begin tapering immediately, by US$ 10 bio, but in doing so, also suggested that interest rates will remain at extreme low levels for even longer than previously anticipated in order to encourage borrowing to stimulate the economy. They also that stressed that they will be in no hurry to raise rates once unemployment reaches the 6.5% threshold that they have previously used as the benchmark from where they would consider hiking, as long as inflation pressures remain benign, below the 2% target.
The end result saw a choppy half hour but with little direction and the dollar made a lot of noise but has ended up doing little from a directional perspective at the time for writing. The Euro remains largely within the 1.37/1.38 range having been up to 1.3811, where it has failed again, before falling to a low of 1.3673, and currently sits right on 1.3700.
Although it all got a bit wild, the technical levels currently remain pretty much unchanged.
On the downside, the break of 1.3700 has taken us us back to test the first major Fibo support at 1.3688 (23.6% of 1.3294/1.3810) and then the 1.3675 support, which at this point currently still holds. A break of this would head back towards 1.3650 and potentially to Fridays spike low at 1.3617, where the next Fibo support also lies (1.3612: 38.2% of 1.3294/1.3810).
If this support remains intact, which is possible given the neutral stance of the 4 hour charts, we could see another run back to 1.3800. As we have said previously, above 1.3800/10 has proved tricky for the Euro but if it can be overcome, then expect the major 1.3830 resistance (25 Oct high/ (61.8% of 1.4940/1.2042) to come under pressure, which, if taken out would trigger large stops driving the Euro on towards 1.3858 (Nov 2011 high), beyond which, the way appears open towards the major downtrend resistance, at around 1.3905 beyond which there is little to stop it heading towards 1.4000 but is currently over the horizon.
Stay very flexible, or even better shut up shop altogether as liquidity thins out ahead of Christmas.
Economic data highlights will include:
EU Council Meeting, Current Account, US Existing Home Sales, Jobless Claims
