Yesterday’s trading was highlighted by the Dollar’s rally across the board after the release of the Federal Reserve’s statement on Wednesday afternoon during the New York trading session. The greenback jumped against the EUR with the pair plunging below a significant support level of 1.3100. The Dollar also reversed most of its downward momentum against the Pound, closing the day at 1.4155. Against the Japanese Yen, the Dollar rose from 89.22 to end the day at 89.68.

The Dollar began the day in the red as traders feared the Fed may take up more unconventional methods of battling the U.S. economy’s downturn. It was suspected that the Fed would buy long-term Treasury bonds in order to help lower U.S mortgage rates. There were also rumors in the market that the Fed would undertake efforts to prevent deflation from occurring. Traders have a negative view of these tactics as a rise in inflation would significantly hurt the Dollar’s purchasing power.

Other traders have also taken the view that the Fed has been very aggressive in tackling the economic crisis in the U.S. The Federal Reserve was out in front of its European and British counterparts, slashing interest rates and aggressively adding bad banking assets to its balance sheet to support the U.S. banking industry. This has helped to create positive momentum for the Dollar.

Today’s trading of the USD will focus on two pieces of fundamental data. Due to be released today is the core durable goods orders and new unemployment claims. Both indicators are expected to show sharp declines. This may hurt the Dollar in the short term, perhaps sending the EUR/USD higher to the 1.3200 mark by day’s end.