It has been an eventful 24 hours in the trading realm following a veritable lack of activity to start the week thanks in large part to a couple of central bank meetings and some telling data about both European and US economies. As covered extensively yesterday (here and here), the Federal Reserve decided to completely taper away Quantitative Easing, a move that was widely anticipated, but also acknowledged more succinctly that the economy was improving to their liking. The positive vibes from the Fed were substantiated this morning as the Advanced US GDP for the third quarter showed stronger growth (3.5%) than expected (3.1%), and combined with Q2 (an upwardly revised 4.6%), was the strongest 6 month showing in a decade. Was the Fed privy to this before they released their statement yesterday? One can only theorize.
In addition to the US proliferation of news, the Reserve Bank of New Zealand shifted away from their hawkish stance to mimic their Australian brethren and go neutral while German and Spanish inflation data regressed even further, sporting negative values. If the European Central Bank didn’t already have a good argument for initiating their QE program, the continuously declining inflation figures in the region tips it in to the almost necessary category. Despite the positivity in the US and the negativity in the European Union, the EUR/USD has bounced off the lows following yesterday’s big drop.
The bounce in the EUR/USD also happened to coincide with a confluence of Fibonacci retracements and extensions that formed a Gartley pattern below 1.26. This level could be a staging point for another retracement to take place before we see an ultimate fall in this pair, which is the direction the ECB most likely wants to see it go.
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