Comment on the situation on a market 19.12.13

Expected surprise

Yesterday at the last meeting of the Fed on monetary policy this year, it was decided to start reducing purchases of government bonds and mortgage-backed securities already in January of the next year in the amount of $10 billion.

So,in January, the Fed will buy assets in the amount of $ 75 billion of which will be bought 35 billion dollars worth of bonds backed by mortgages and 40 billion worth of government bonds.

The Fed is trying to solve two problems at the same time. First, understand that the economy is recovering and must already begin to reduce the stimulus, the second is to leave a "carrot" for the markets in the form of promises that rates will remain at a low level for quite some time.

The market has already swallowed a “carrot”, demonstrating growth in major stock indexes. But the bond market with its yields dynamics on government bonds have not yet showed the signs of optimism.

Yesterday during Bernanke yield on the benchmark - the 10-year Treasury Note jumped to 2.88%, which is certainly supported the dollar. Futures on the ICE Dollar Index to a basket of major currencies jumped to the level of 80.80 points.

Based on the above we can assume that the EURUSD will continue to decline to the level of 1.3600-15, which corresponds to 38% Fibonacci if it can overcome the level of 1.3650.