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Constant ‘reassurances’ from various European Central Bank members that deflation is not of any concern presently have been taken at face value by market participants.
Comments from the Wall Street Journal’s Jon Hilsenrath – who watches the Federal Reserve closely – that the Federal Open Market Committee is likely to continue to pare back its current asset-purchasing scheme by an additional $10 billion per month have also affected price action in the EUR/USD pair.
The dollar has recouped some of its losses now and the dollar index may well make an attempt to push through the 200-day moving average at 81.50, which would help underpin the current trajectory against the euro.
As suggested yesterday, the 100-day moving average at 1.3567 is the key barrier to upside for the single currency now, with the support at 1.3520/25 still holding fast. Any moves back down through the support could see 1.3350 (200-DMA) eyed. Pushing through the 1.35 psychological level will be a tough ask in the interim. Any moves back through the 100-DMA could see a retest of the 1.3620 upside resistance.