EUR/USD Analysis: Euro Rallies Due to Federal Reserve Report

NEW YORK (Forex News Now) – After being shelled in forex markets for the past three days, the euro managed to stage a rally against the dollar in trading today – albeit due to the dollar falling across the board with the news of a report confirming quantitative easing is forthcoming.

Today, a source from Medley Global Advisors released news about a report concerning the Federal Reserve and planned monetary policy for the November meeting.  The report stated that the Fed plans to purchase $500 billion worth of U.S. Treasury securities over a six-month period, beginning in November.

“The Fed will reach a majority consensus to embark on a new round of sizable Treasury purchases at the end of its two-day November meeting, aimed at raising inflation expectations and gradually satisfying both sides of its inflation/growth mandate,” said the report.

As a result of the news, the dollar plunged against the euro by 1.67%, at $1.3959.  The dramatic rise in EUR/USD virtually made up for the previous day’s loss.  EUR/USD analysis confirms that the pair is now just under the mark it reached previously on Monday, affirming that the euro has regained the lost ground and is poised to test resistance levels.

Analysts predict that selling interest in the euro hovered near the $1.4010-20 mark, giving the currency further room to appreciate.

The euro was further supported by an increase in German bond yields, as well as a general consensus anticipation that the European Central Bank will soon employ tighter monetary policy.

Of course, what is still to come with the G20 meeting in November – and the agenda-setting meeting this Friday – will have an effect on EUR/USD analysis.  If currency issues are addressed in a substantial way in November and appear to point towards cooperation and compromise in the global markets, it is possible that the Federal Reserve will elect to reduce the size of QE.

This move would be positive for the dollar and would likely send the dollar up against the euro.
Still, some analysts are bullish on the euro’s long-term prospects.  Analysts at CitiFX have a target of $1.5145, a mark not reached since November, 2009.

Today’s development is undoubtedly good news for euro-heavy investors who were concerned yesterday when the euro appeared to lose steam.  The near-term, though, will likely be choppy and uncertain until November rolls around and the Federal Open Market Committee and G20 community both clear up the air.