US Dollar Gains 200+ Pips after Rate Hike to 0.75%
Yesterday the central bank of the U.S. (Fed) decided to increase its interest rate by a quarter percent from 0.5% to 0.75%. The rate hike had a positive impact on the US Dollar (USD), which saw gains across the board against the EUR, GBP and JPY. The EUR/USD broke the support trend line (dotted blue) and fell below the 1.05 support level (dotted green). Price will however still need to break below the previous low at +/-1.0450. A bearish break is needed before a wave 3 (brown) has the potential to be confirmed and develop beyond the 100% level.
The EUR/USD completed the ABC zigzag (purple) and most likely finished wave 2 (brown), although it does depend on how price reacts at the last support level (green). A strong bullish bounce could indicate that a correction is still ongoing.
The GBP/USD also responded with bearish price action in response to the rate hike in the US. The Cable respected the resistance trend line (red) and showed a bearish turn. Price broke below one support trend line (dotted green) but still needs to break below the next support trend line (green) before a larger wave 3 (blue) within wave 5 is possible.
The GBP/USD seems to be in a wave 3 (orange) impulse and could head towards lower Fib targets. Once wave 3 is completed, it should build a shallow wave 4 correction and then continue with a wave 5 within wave 3 (blue).
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