EUR/USD on highs unseen in seven months after Federal Reserve Bank’s policy decision

The euro reached its highest point in seven months against the US dollar on Thursday, after on Wednesday the Federal Reserve did not introduce any reduction of scale of its monthly asset purchases at its two-day policy meeting.

EUR/USD hit a session high at 1.3540 at 6:31 GMT, also the pairs highest point since February 7th, after which consolidation followed at 1.3528, gaining 0.04% for the day. Support was expected at September 18th low, 1.3338, while resistance was to be met at February 7th high, 1.3596.

US dollar faced a large-scale sell off yesterday after the policy-setting Federal Open Market Committee (FOMC) abstained from reducing the 85-billion-USD pace of monthly securities purchasing. This decision underscored Chairman Ben Bernanke’s willingness to do anything to lower unemployment and pushed back market expectations for a tightening of policy, according to Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, Bloomberg imparted. Bernanke said at the press conference after the FOMC meeting, that the central bank must determine its policies based on “what’s needed for the economy,” even if it surprises global markets. This decision also triggered the largest rally of the US bonds since 2011.

Bernanke said he was “somewhat concerned” by the influence of rising bond yields on the economy and was willing to “wait a bit longer and to try to get confirming evidence” that economy is showing signs of lasting improvement. He also added that the impact of “restrictive fiscal policies” might pose risks. “Our policy decision today makes conditions just a little bit easier, that’s desirable,” Ben Bernanke said. “We want to make sure that the economy has adequate support.”

In the mean time, the euro remained supported, after an optimistic series of ZEW indicators out of Germany and the Euro zone, that came out on Tuesday. German index of economic sentiment increased by 7.6 points to reach a value of 49.6 in September, the highest point since April 2010 and significantly exceeding preliminary estimates of a reading of 45.0. ZEW economic sentiment indicator for the Euro zone as a whole rose by 14.6 points to reach 58.6 in September.

Elsewhere, the euro was gaining against the sterling, as EUR/GBP cross added 0.18% on a daily basis to trade at 0.8391 at 7:21 GMT. EUR/JPY pair was advancing 0.83% to trade at 133.55 at 7:23 GMT.

Later in the day, the United States will release data on the weekly initial jobless claims, existing home sales, current account and the Philadelphia Fed index of manufacturing, as stronger than projected results may provide support to the greenback.