Dollar Plunges Ahead of Fed Interest Rate Cut

The dollar plunged Monday as investors ahead of Tuesday’s Federal Reserve interest-rate decision that will likely see further Fed quantitative easing measures. The greenback has lost its safe haven appeal and broken technical levels, indicating further losses as the US recession deepens and the central bank floods the financial markets with dollars. The greenback approached a 13-year low against the yen, traded near a 2- month low versus the euro, and depreciated against the Canadian dollar. Sterling rebounded from an all-time low versus the euro.

After penetrating the resistance from the long-term downtrend, the EUR/USD rose and reached the highest level since October. The break of the 1.35-area resistance is an important technical development, indicating further gains for the pair. There are resistances in the 1.38 and 1.40 areas. If these resistances are broken, the EUR/USD may test the 1.46-area. The 1.34-area is now support.