03, May 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

As it was expected, the ECB decided to reduce the rate by 0.25% to 0.5% yesterday. Deposit rate remained unchanged at 0.0%, the maximum rate on loans decreased from 1.5% to 1.0%.

The U.S. dollar fell against major currencies after the publication of the USA Federal Reserve System. Fed met the expectations of market participants, saying that it intends to continue the current program of bond purchases.

In a statement released Wednesday by the Committee on the Open Market of the Fed said that it was ready to increase or decrease the rate of asset purchases, "when the prospects of the labor market and inflation will change." In the current program the Fed buys bonds in the amount of 85 billion dollars on a monthly basis in order to keep long-term interest rates low and stimulate economic growth. Fed program aimed at stimulating economic growth, as a rule, is a negative factor for the dollar.

According to Rabobank, reduction of interest rates is a negative factor for the euro, and they "see EUR/USD potential in EUR/USD 1.28 for 3 months in advance, but it is likely that the long positions will have a decent support. As a result," we still expect to trade in the range of the short-term. "