Market players moved into higher risk currencies such as the Euro and shunned both the U.S. Dollar and the Japanese Yen following the U.S. Federal Reserve’s announcement yesterday to maintain its $85 billion monthly bond-purchasing scheme. The Fed decision to maintain the status quo until there was a substantial improvement in the U.S. economy and the dismal labor situation there was very much in line with analysts’ expectations. With no real shift from the aggressively loose monetary policy of the current QE3 scheme, the U.S. Dollar is likely to continue to downtrend.
As reported at 2:15 p.m. (JST) in Tokyo, the EUR/USD pair was trading at $1.3570, a 14-month high, having finally broken through the key resistance level at $1.35. The U.S. Dollar Index, which measures the greenback’s value relative to a weighted basket of major currencies, slipped at one point in the Asian session to 79.183 .DXY before recovering to 79.263 .DXY however currency strategists expect that it could technically trend lower if it breaks through support which is pegged at 79.2 .DXY.
Market players will be watching for Friday’s private sector labor data to gauge the labor situation; yesterday ADP reported that 192,000 new jobs had been added in December which was well above the consensus call of 165,000 jobs.