Euro/dollar is trading below the 1.2360 line, erasing gains seen in the previous week. The pair was already hit by some EZ QE talk, managed to lift its head temporarily on a balanced FOMC statement, but then came Yellen.
We usually see the full reaction to Fed decisions taking time. What are the levels to watch?
Yellen basically said that rates will rise in 2015, erasing doubts. She did say rates will not rise in the next “couple of meetings†and some markets see it as a hint for a hike in April. Her view on employment was positive and her view on oil prices was a “net positiveâ€. She sees lower inflation as transitory.
On the downside, we have some support at the round number of 1.23, but real support comes only at 1.2280. Further support awaits at the 2012 levels of 1.2250.
If the fall accelerates, we could see support only at 1.2150 and of course, the July 2012 low of 1.2042, that was reached just before Draghi made his “whatever it takes†speech, is critical support.
On the topside, we have 1.24 as initial soft resistance with more important resistance at 1.2450. The round number of 1.25 remains key and the last line we have 1.2570. A bounce could happen if analysts see the dovish side of the Fed statement and Yellen’s cautiousness.
Here is how it looks on the chart:
