The Federal Open Market Committee (FOMC), the board of the Federal Reserve, released a statement on December 16, 2009 that indicated that the board felt that the US economy is on a slow road to recovery with little chance of inflation.  Information received since the Federal Open Market Committee met in November suggests that economic activity has continued to pick up and that the deterioration in the labor market is abating.

Also mentioned was an expanding rate of household spending, and an improvement in the housing sector.  The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Fed also anticipates that most its special liquidity facilities will expire on February 1, 2010 as planned.

Financial news in Europe has not been good.  Fitch Ratings and Standard and Poors have downgraded the financial rating of Greece, due to a 12% national debt.  Spain and Portugal have also been warned of possible cuts in their ratings as well, once again citing  national debt as the primary concern.

All of this is considered to be good news for the Dollar which has been gaining against the Euro for three weeks now, creating an anticipated retracement on the EUR/USD paid following the completion of a 38-to-138 Fibonacci pattern.

Let's take a look at the current situation on a weekly chart of this pair.  Also included is a closer look at the 5 minute chart just before, during, and after the release of the FOMC report.

Starting with the news, we see that while price spiked initially after the announcement, the close of the candle, along with the 21 exponential moving average holding as resistance, suggests that the announcement had little bearing on the EUR/USD's overall trend down,

As for what we can expect going forward, the price has just hit the 0% Fib level at 1.4340, a likely first target for the retracement.  In order for the price to continue to fall, it would first need to break this 1.4340 level and then retest from underneath as the new resistance.  In this scenario, 1.3996 and 1.3783 become the next likely targets.

If instead price finds support at the 0% Fib level and starts moving up again, the levels to watch for resistance at would be 1.4602 and 1.4733, possibly eventually forming a double-top at 1.4897.

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