FOMC halts EUR/USD rise

The EUR/USD has dropped by over a 100 pips following the Federal Open Market Committee statement last night.

The FOMC confirmed it will trim its monthly debt-purchasing scheme by a further $10 billion, taking the total down to $55 billion a month. This is made up of $25 billion in agency mortgage-backed securities and $30 billion in longer-term treasury securities. Markets have managed to absorb this change in monthly stimulus, partially due to the fact it has been signposted for so long. Previous Fed chairman Ben Bernanke spent the best part of a year repeatedly warning markets that these cuts would be happening in the future.

The balance of the report also confirmed that US recovery continues to move in the right direction, even though it has periodically hit hurdles such as the particularly poor weather conditions that the eastern seaboard was subjected to in the early months of the year.

This morning sees the start of the latest EU economic summit; we will undoubtedly see comments covering the banking system and the low inflation levels.

For the time being, the reverse movement that has seen EUR/USD drop by 120 pips is just a correction. An inability to find support around the $1.3800 level could see a move back down, further towards the 50- and 100-day moving averages either side of the $1.37 level.

Spot FX EUR/USD chart

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