EUR/USD
The main consequence of yesterday's FOMC decision was the decline in the stock markets. The US S&P 500 lost 0.94%, and this morning, the Japanese Nikkei 225 is down by 1.26%. Earlier, we stated that we were only expecting a significant decline in counter-dollar currencies once there was a stock market crash. Now, let's take a quick look at the weekly chart of the S&P 500:
The decline started exactly at the 10th Fibonacci timeline. The current candle is accelerating this decline. The first target is the intersection point of the two Fibonacci rays – the blue and red lines at the level of 4325.00. In the medium term, we expect the index to reach the intersection point of the 76.4% Fibonacci level, the blue Fibonacci ray, and the embedded line of the global price channel, which is around 3979.00. Another sign of a medium-term decline is the Marlin oscillator transitioning into negative territory.
FOMC members have incorporated a slower pace of rate cuts into their dot plots than what market participants had expected. The average rate for 2024 has increased from the previous 4.6% to 5.1%, and for 2025, it has risen from 3.4% to 3.9%. The market driver has been the rise in yields on US government bonds, which are more closely tied to the current rate. The rise in the 5-year yield has been significant, from 4.51% to the current 4.61%.
So how deep will the euro fall? Formally, the nearest target is 1.0613, followed by 1.0552, and then a complex range from 1.0483 to the Fibonacci ray. However, the signal line of the Marlin oscillator is still within the structure of a double convergence. It can be broken if this doesn't turn out to be a convergence but instead a wedge with the prospect of a break below. Also, take note that in the last two days, the shadows pierced the nearest resistance of the Fibonacci channel, which favors the bears.
So, in general, the euro has followed an alternative scenario, but to confirm it, the price needs to consolidate below the nearest support at 1.0613.
Its own double convergence is forming on the 4-hour chart. To break it, the price needs to consolidate below 1.0613. If it consolidates above 1.0687, this will also mean that it has consolidated above the MACD line.
Today, the Swiss National Bank is expected to raise its rate from the current 1.75% to 2.00%, and the Bank of England may raise its rate from 5.25% to 5.50%. These factors may support the euro. And the stock market, even with the prospect of a sharp decline, will always find reasons for a correction.
