Yesterday’s move by the US central bank to cut the monthly bond-buying scheme by $10 billion to $75 billion took the market by surprise. According to a survey by Bloomberg, 64% of respondents were not expecting any tapering, so when the news broke, dealers sold the euro. EUR/USD is now trading at $1.3678, down 0.05%.
The bond-buying scheme helped the US economy recover from recession, but quantitative easing also put pressure on the dollar. The prospect of a reduction in the programme has encouraged traders to buy the dollar.
The Federal Reserve released a dovish statement and reassured traders that interest rates would remain ultra-low for the foreseeable future. Now that unemployment in the US has reached 7%, the Fed named 6.5% as its new target.
The euro reached a double top around the $1.38 level, and support seems to be at the $1.3620 mark. If the euro drops below this level, we are likely to see it decline towards $1.35.