Forexpros – The euro gained ground against the U.S. dollar on Wednesday, as the Federal Reserve pledged to hold its target for the federal funds rate at zero to 0.25% for a “highly accommodative” monetary policy untill late 2014.
EUR/USD traded to a high of 1.3074 and posted a low of 1.2931. It is currently trading at 1.3068, up 0.25% on the session.
The pair was likely to find support at 1.2874, Monday’s low and technical resistance exists at 1.3062, Tuesday’s high.
The Fed had pledged to keep its target rate in place until mid 2013. It has now moved this date until late 2014 resulting in the greenback’s sell off.
Brian Dolan at Forex.com told Bloomberg, “Late 2014 is much longer than the market had expected, that’s why we are seeing a negative dollar reaction. They are assuring market rates will remain low and spurring some economic gains.”
Traders are awaiting Bernanke’s press conference later in the day, when forecasts for the main interest rate will be revealed for the first time.
Greece continues to lead the bearish worries in the euro zone. Yesterday, hopes were dashed of a last minute bond deal to avoid default when officials rejected a final offer from private creditors.
Reports of the European Central Bank being opposed to restructuring its Greek holdings added to the tension.
Euro bullish data from Germany indicating improved business confidence helped support the single currency.
In the U.S. data showed that pending home sales fell more than expected last month, after climbing to a 19 month high in November.
The euro climbed against the pound with EUR/GBP advancing 0.37% to 0.8373.
Investors are awaiting reports on U.S. new home sales, unemployment claims and durable good orders on Thursday.
In other news, the Federal Reserve will announce its interest rate forecast for the first time today and The World Economic Forum is underway in Davos.
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