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EUR/USD Update – Dovish Fed to Damp Dollar in Surprise to Market, BNY Says



Good day forex traders and readers.

Welcome to our daily update of the EUR/USD. Observing the technical chart, we do note that the currency pair has now pushed beyond 1.34 as we head into the week. Having said so, the next immediate resistance may be 1.3480 and hence caution must be taken to see if the bullish momentum will be strong enough to push it beyond.

Find below an interesting article on the possibility of a weakening US dollar due to slower tapering of the quantitative easing program of the US Federal Reserve. If indeed so, it will be a good guide for a long term trading approach :

The dollar will reverse recent gains versus the euro and the yen in coming months as the Federal Reserve pares monetary stimulus at a slower pace than the market expects, Bank of New York Mellon Corp. said.

The greenback, which touched eight-week highs this month against its two most-traded peers, will test $1.38 per euro in three months, and $1.45 over 12 months, Simon Derrick , the London-based chief currency strategist at BNY Mellon , said at a roundtable discussion in Tokyo today. The U.S. currency could weaken to as low as 93 yen within five months, he said.

“If the U.S. is to deal with its fiscal problems over the next two to three years, then it also means that there’s going to have to be a cushion of easy monetary policy,” Derrick said. “In the short term as well, I think that U.S. monetary policy is likely to remain on the far more accommodative side than perhaps people are giving it credit for this year.”

The dollar will strengthen to $1.28 per euro and 110 yen by the end of 2014, according to median analyst forecasts in compiled by Bloomberg. The U.S. currency rose 0.1 percent to $1.3387 per euro and 0.5 percent to 99.70 yen as of 4:59 p.m. in Tokyo from yesterday. It reached 99.73 yen today, the most since Sept. 13, and $1.3296 per euro on Nov. 7, the strongest level since Sept. 16. Tapering Bets

The dollar has rallied 1.5 percent since Nov. 6 against a basket of developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes as reports showed an unexpected acceleration in U.S. economic growth and job creation.

Derrick predicts the Fed will begin tapering its $85 billion of monthly debt purchases at the central bank’s March 18-19 meeting, matching the median […]

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