Yesterday's Fed outcome has pummeled the dollar, but it will take more than that to create a sustainable EUR/USD rally.
Though it wasn't as dovish as equities investors hoped, the forex acknowledges that the Fed couldn't meet market expectations in one go and still hike as it had signaled.
Rate spreads between the U.S. and other major economies have narrowed, fueling EUR/USD's 0.72 percent rise to 1.1460, near 100-DMA resistance around 1.1486.
It's reminiscent of early 2018 strength in the euro, which rallied on misjudged expectations that the ECB would accelerate its rate-hike plans.
When European growth and inflation underwhelmed, the euro tumbled, as U.S.-German 10-year spreads widened, from April highs by 1.24 to the recent 2018 low 1.1216 in early November. To avoid a similar fate in 2019, EUR/USD needs to get some help from -- of all places -- Europe.
For now, the rally off the November lows is little more than position trimming.
Spec positioning moved negative as EUR/USD fell below 1.1600 in August.
A rise above October highs by 1.1623 is needed to give euro bulls momentum.
Without European growth and a more hawkish ECB, a move above the 1.1816 September high and 2018 highs by 1.2500 are unlikely.
Initial EUR/USD resistance is at 1.1517, the 50 percent Fib of the 1.1816-1.1217 dip, then the October 16 high of 1.1623.
EUR w/Spread Chart: Click here