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EURUSD Rate hike = Pair rises based on 30 year historic sample

Long
FX_IDC:EURUSD   Euro / U.S. Dollar
Following Jerome Powell's confirmation of a rate hike this March (2022), EURUSD is getting sold aggressively. This is a good time to look into how rate hikes affect the pair's price action historically. The sample on the main chart is from January 2001 for technical reason's because I wanted to better display the giant Triangle the pair has been trading in until the COVID event. If you want to include a 30 year data set then look at the chart below, which also includes the February 04 1994 rate hike:


So what does this chart tell us? To begin with, in this 30 year span which is a sizable sample for our analysis, there have been 3 rate hikes:

* December 16 2015 when the rates started rising from 0.25% to 0.50% and gradually topped at 2.50%
* June 30 2004 when the rates started rising from 1.00% to 1.25% and gradually topped at 5.25%
* February 04 1994 when the rates started rising from 3.00% to 3.25% and gradually topped at 6.50%


We can see that every time the EURUSD pair bottoms at (or in the case of June 2004 a month before) the day of the rate hike and initiates a very aggressive rally. Since the next Fed event is on March 16 2022 when the next rate hike will be announced, we could assume that the pair is at or very close to a bottom.

On thop of that and with regards to the giant Triangle I mentioned above, we see that the price has been trading within that from October 2000 until July 2020. Since the break-out from this pattern, the former upper (Lower Highs) trend-line of the Triangle has been tested as Support twice (September 2020 and November 2021). After the sell-off since yesterday, the price finds itself once again on top of this trend-line.

Can this be another bottom formation as the March rate hike approaches? It is possible. What's certain is that before every rate hike since 1994, the price was trading below its 1W MA50 (blue trend-line) and after that it broke way above it. For your reference, the 1W MA50 is currently at 1.17396.



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