US dollar rally resumes following FOMC release

Widespread support for the US dollar following the latest Federal Open Market Committee release is likely to add continued pressure to the euro and sterling.

Dollar and euro notes
Source: Bloomberg

Sterling bears in full flow

GBP/USD has reached a key technical area of resistance to the downside at $1.556, which the pair has since bounced off heading into the London open session on Thursday. Wednesday’s FOMC release saw a rather muted approach to talk of rate normalisation as well as a downplaying of the role oil has, or indeed may have, in exacerbating pre-existing fears regarding global deflation. As a result, both stocks and the dollar have come in for widespread support.

The intermediate directional bias in GBP/USD is likely to be determined by a close either side of the aforementioned $1.556 level. A close above could signal a re-testing of topside support at $1.560-$1.565, while a close below sees the next clear level of resistance at the $1.547 level. 

GBP/USD chart

Euro looking to bounce off positive German data

Similarly to GBP/USD, the EUR/USD pair has pushed lower on the back of increased US dollar strength, resulting in a key intermediate technical level being tested at $1.234. However, with a close being posted under this key level, the previous area of resistance could turn into support and an area of stop-loss triggers for bets on further downside. The next clear area of downside resistance presents itself at $1.229-$1.222.

German business data is scheduled for release at 08:45 (London time). It is likely to offer some respite for euro pairs should expectations of an increase to 105.4 from 104.7 month-on-month be realised in the German Business Climate Index. Should a move higher be seen, a re-testing of $1.234-$1.238 could be seen. 

EUR/USD chart

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