Dovish ECB sees euro pullback

The expression ‘don’t fight the Fed’ has never been more accurate in light of the currency movements seen in the aftermath of Federal Reserve chairman Ben Bernanke's speech.

While other central banks can be as dovish as they like, the power of the Fed was all too prevalent as the dollar sank and the euro shot up as a result of Ben Bernanke’s statement, breaching the $1.32 level last night.

Today’s release of the European Central Bank’s monthly bulletin contained similar dovish tones, echoing comments from the last press conference but with a more hawkish stance coming from Bundesbank president Jens Weidmann, who spoke at a banking conference in Munich earlier today.

The euro is finding buyers at the 100 DMA at 1.3020. A fall through here should find some support at $1.30.

Traders will still be inclined to keep a close eye on unemployment claims, due out at 1.30pm (London time). Given that Mr Bernanke believes US unemployment to still be an obstacle, a higher number than the 342,000 expected may weaken the dollar further.

Spot FX EUR/USD chart

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