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Euro defying gravity

The euro seems to be defying gravity at the moment and managed to rally yesterday particularly against the greenback.

Fifty euro banknotes are arranged for a photograph in London
Source: Bloomberg

The single currency benefitted from comments by ECB President, Mario Draghi, on the back of the ECB meeting. Mr Draghi upgraded inflation forecasts and said the central bank would press on with its bond buying.

EUR/USD started its rally a couple of days ago as optimism around Greece drove sentiment.

The pair rallied back above $1.1000 and has since extended these gains, helped by Mario Draghi. EUR/USD printed a high of $1.1285 (highest since Tuesday 19 May) and is now fast approaching key near-term resistance.

There is a downtrend resistance line from December last year, which capped price during the big run in May. This line currently comes in at around $1.1300 and I feel that’s where some sellers will be looking to return to the market.

The move higher has perhaps been exaggerated by stops and short covering, so perhaps this might mean it’s on its last legs. Analysts are still broadly targeting parity for the pair in the medium term.

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