Bernarke supported the dollar
EUR/USD pair continued descending on Thursday during the European session. The press-conference, as well as commentaries and responses of its participants landed strong support to American currency, despite the fact that Federal Reserve System made a statement about the beginning of closing the policy of quantitative easing later this year. However, the market has been expecting it, because the chairman of Federal Reserve System made a statement about the possibility of this outcome towards the middle of next year. Decrease or stop of the policy of quantitative easing frees the market from constant supervision and security on behalf of the USA.
The story about two central banks
We have two central banks in this special pair, but they are in different camps. We have European Union which is moving towards the recurring descent and the US, that are in time, if we take into account all the circumstances. And the rates should start moving slowly higher in the USA, while Euro is in serious danger because of descent of rates of interest. Such situation is certainly not in favor of Euro, that is why get ready to witness weakening European currency very soon.
The situation on the market
From a technical point of view, EUR/USD pair broke down and consolidated lower than the level of 1.33 on Wednesday. During Asian and European sessions on the market there is still a strong prevalence of bear mood, and the pair is trading in the area of support at the level of 1.32. Will it be capable of slow down the fall? – most likely, not. The power of dollar is becoming stronger, and we think that the closest aim will be a level of 1.30, which earlier had been critical between two zones of consolidation, passing this level will aim Euro towards lower levels, more specifically towards the level of 1.28. With the beginning of American session, the focus of attention of traders is the publication “Primary applications for unemployment benefit” in the USA, good data can give dollar acceleration.
On the whole, after FOMC reports and market reaction to commentaries of FRS representatives, we think that short-term ascending trend stopped, and long-term descending trend that some people have forgotten long ago, is in “rehabilitation”, that is why we recommend looking for opportunities for short positions, which can be breakdown and consolidation lower than 1.32, as well as positive data on unemployment rate in the USA.
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