25, July 2013

EUR/USD (a 4-hour chart)

EUR/USD (a 4-hour chart)

The U.S. dollar fell against major currencies on Tuesday after the publication of the U.S. manufacturing industry data, which was weaker than expected.

The Federal Reserve Bank of Richmond (Richmond Fed) said its manufacturing activity index of the Central Atlantic region fell sharply in July, because of falling in demand and the volume of new orders. Taking into account these weak data, traders took the opportunity to take profits on the dollar. After rising to three-year high in early July, the U.S. currency has been steadily declining over the past two weeks, while investors expect further signals about the direction of Fed policy. Earlier this month, the dollar has received support on expectations that the Fed could cut the program of bond purchases in September. Fed Chairman Ben Bernanke said last week that he expected "slow" pace of asset purchases this year. Investors expect further evidence to support or refute the theory of long-term strengthening of the dollar.

Bernanke said the Fed's potential collapse of incentives would depend on improving of U.S. economic data. Additional evidence about the health of the economy will be received this week. The data on new home sales were published yesterday, the data on durable goods will be released today, and the index consumer confidence - on Friday. The following week, the Fed will give a formal evaluation of its monetary policy, holding Committee meeting on the open market on Tuesday and Wednesday.