Support for the pair is coming from the 50-hour moving average with rising channel support below that from 1.3480/85. For now, the potential to buy-in on the dips seems like the best course of action, with the upper band of the channel giving a target of 1.3590/1.36.
Last night’s comments from the current Federal Reserve chairman Ben Bernanke, reiterating the bank’s commitment to continued accommodative monetary policy, were ultimately the trigger for the initial euro surge versus the greenback. Conversely, the European Central Bank’s Vitor Constancio has stated that quantitative easing in the eurozone is a possibility but that it hasn’t been discussed. Following the mediocre support the last rate cut received from the European core economies, one would expect that the adoption of QE is theoretic and will more than likely remain so. However, German PPI prices today would indicate that inflation is not an immediate problem.
US consumer price index numbers are due later in the day. Year-on-year US inflation is expected to retreat from 1.2% to 1.0%. This is likely to feed quite well into the plans of both the current Fed chair and the incoming one, and should put pressure on the dollar.
Poor retail sales should also embolden the euro bulls. Expectations are certainly not high, particularly in light of a recent poll that showed that Americans plan to spend less on Christmas gifts this year.
The release of minutes of the Fed October meeting later this afternoon is on everyone’s radar, as traders looks for additional indications of monetary policy plans.