The US dollar has fallen a bit during the trading session on Wednesday, reaching down to the important 113 handle. However, as the Federal Reserve statement comes out, we could get a bit of volatility in this pair. This is because people will be waiting to see whether the Federal Reserve is more hawkish or dovish going into the statement. The 112 level below should be a bit of a support barrier, and I think that we would be hard-pressed to break down below there unless the Federal Reserve becomes overly dovish. I don’t see that happening, because quite frankly at this point the Federal Reserve is starting to lose credibility with a lot of investors as they have been threatening to raise interest rates for quite some time.
Because of this, I think that we will probably turn around and reach towards the 114.50 level above, but it will take some time to get there. If we can break above the 115 handle, it then becomes a buy-and-hold scenario, but we are a long way away from that. In fact, I suspect it’s going to take the tax bill passing to get over that hurdle and continue to go higher for the longer-term. In the meantime, we will pay attention to the central bank, but we will also need to see tax reform for the rally to be sustained for any length of time.
Written by FX Empire