The EURUSD trades comfortably above the 1.22 level after the Fed in the United States kept a dovish stance. While the Fed did not extend the QE program as many market participants expected, it did leave the impression that it will start targeting long-term bonds next year and showed that it expects fiscal stimulus sooner rather than later.
As such, the EURUSD dipped on the news that the QE was not extended. However, the move lower was temporary, as market participants realized that the path of least resistance remains a lower dollar. In fact, the consensus for next year overwhelmingly points to a lower USD, making it difficult to trade anything else from a contrarian perspective, especially at this time of the year.
Because of that, any contrarian trade should take the path of least resistance – waiting for a market move before selling.
EURUSD Technical Analysis
Yesterday’s EURUSD reaction showed the power of the 1.2150 area. It acted as a strong resistance for the past two weeks, and yesterday acted as solid support. As such, only a move below 1.2150 grants a short entry for courageous bears. After all, the dominant trend is a lower USD.
As such, on a move back to 1.2150, bears may want to sell with a stop at the highs and target a 1:2 rr ratio.
EURUSD Price Forecast