I think that the market will eventually see a bigger move, but right now people are still looking at the Federal Reserve.
The British pound initially tried to rally during the trading session on Wednesday but then gave back the gains as people start to worry about the Federal Reserve and whether or not it is going to taper within the next couple of years. The US dollar spiked higher as not only did people start running away from anything that was not the greenback, but they also started to cause a bond spike, so it made the feedback loop kick into full gear.
That being said, the 1.40 level is an area that should be rather important, as it was previous resistance. When you look back, you can see just how important this level was, and it is worth paying close attention to what happens next. If we break down below the 1.3980 level, it could cause a little bit more selling, and we could go looking towards 1.38 level. On the other hand, if we were to turn around and take out the 1.4025 level to the upside, then it is possible that we could see this market try to get back to the 1.41 handle.
Long term, the 1.42 handle is an area that needs to be taken out on a daily close in order to get overly bullish, because at that point it is likely that the market would go screaming to the upside to go towards the 1.45 handle. With that being the case, I think that the market will eventually see a bigger move, but right now people are still looking at the Federal Reserve and, when the dot plot ended up moving closer to present time, the market absolutely freaked. That being said, this is probably more or less going to be a short-term phenomenon, but we will have to wait and see what happens over the next 24 hours. I would be very cautious about putting too much money to work until we get the clarity that is necessary. This could end up being a buying opportunity, but again, we need to get above to the upside and clear that 50-day EMA at the very least to get bullish. If we break down, there are multiple areas that value hunters could get interested in, because the US dollar has not changed completely, so I think it is an overreaction.