The US dollar strengthened against the euro after the FOMC statement may have given a sign that liftoff can still occur in September. Many analysts were expecting a much more hawkish statement, but it is clear that voting members are divided on the timing of raising rates. If job gains remain "solid", the Fed will feel more confident with moving rates after the summer.
Price action on the EUR/USD daily chart shows the double-top pattern that formed in the middle of June has triggered a major slide that finally found support last week with the 1.08 handle. The recent rebound has strengthened and surged above the 100-day SMA but ultimately respected the 50-day SMA. It appears that the short covering move is over and the bearish slide may be ready to resume. Key resistance will come from the 100-day SMA, which is currently trading just below the psychological 1.11 handle.
If the longer-term bearish trend resumes and price breaks below the 1.08 handle, we could see a clear path toward the 1.0650 zone. It is around that area that we could see the formation of a couple bullish reversal patterns. Major support will eventually come from the 1.04 level.
The trade: Sell EUR/USD at 1.0985 with a stop loss at 1.1035 and a take profit at .1.0885. The Risk/Reward Ratio is 1: 2
Edward J. Moya
Senior Market Strategist
WorldWideMarkets Online Trading