Forexpros - The euro extended gains against the U.S. dollar on Tuesday, recouping some of the previous day's sharp losses, as investors awaited a Federal Reserve statement on monetary policy, which could provide hints regarding further monetary easing.
EUR/USD hit 1.4287 during European afternoon trade, the daily high; the pair subsequently consolidated at 1.4263, climbing 0.59%.
The pair was likely to find support at 1.4054, the low of August 5 and a two-week low and resistance at 1.4425, Monday's high.
The Fed's Open Market Committee was to meet later Tuesday, a day after the Dow Jones Industrial Average suffered its sixth-biggest drop on record and two days after leaders from the Group of Seven Nations pledged to "take all necessary measures to support financial stability and growth."
With financial markets in turmoil, expectations grew that the central bank would introduce further easing to calm investors and stimulate growth in the world's largest economy after it completed a USD600 billion Treasury bond-buying program known as Quantitative Easing 2 on June 30.
At its June meeting, the Fed reiterated that interest rates would be "exceptionally low" for an "extended period" and said the policy of reinvesting maturing securities to keep the balance sheet steady would be maintained for an unspecified period.
The "extended period" phrase means that the FOMC is at least two or three meetings away, or "significantly longer," from taking any action, Fed Chairman Ben Bernanke said at a June press conference.
Mr. Bernanke was not scheduled to hold a press briefing following today's decision, unlike after the June 21-22 policy meeting.
The euro was also up against the pound, with EUR/GBP gaining 0.43% to hit 0.8726.
Earlier in the day, government data showed that Germany's trade surplus narrowed in line with expectations to EUR11.5 billion in June, down from May's surplus of EUR12.9 billion.
Also Tuesday, the U.S. was to publish preliminary data on nonfarm productivity and labor costs.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
