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USD Fights Back After Post-FOMC Selloff

During the 7/26 session, the market sold the USD after the Federal Reserve's monetary policy announcement. The announcement was very much as expected, a hold on the benchmark interest rate and guidance that "the committee expects to begin implementing its balance sheet normalization program relatively soon." (reuters).

The market has been feeling doubtful of the Fed's guidance of 2 more rate hikes in 2017, mainly due to slow growth and subdued inflation so far this year. To me, this week's announcement neither supports nor challenges the 2 rate hike expectation.

The market's reaction was bearish towards the USD, selling it across the board. But the greenback has been fighting back during the European session. Let's take a look at the USD/JPY.

USD/JPY 4H Chart

(click to enlarge)

Bearish Bias:
- The 4H chart shows a bearish bias even before the Fed announcement.
- But, price was actually rallying before the Fed announcement, and made an about-face immediately afterwards.
- Despite the bearish bias, price did not reach this week's low and is instead showing less bearish bias because it failed to make a new low. 
Triangle?
- It's possible the market is going to consolidate here around 111.50. So far, with a lower high and a higher low, it looks like price is contracting into a triangle. 
- We will likely have to wait a few sessions for some clue on direction. But if price breaks above 112.20, we could be looking at a bullish attempt towards the 114-114.30 resistance area.