EUR/USD Breaking Even Higher on Trichet

Jean-Claude Trichet continues to boost the Euro in two different channels. The result is that we have a second resistance line broken with one day. Update on the vigilant Euro.

EUR/USD had a very hard time around 1.4030. It encountered this line many times, and failed to breach it. But these days aren’t normal.

Unequal intervention

Following the collapse of USD/JPY to new historic levels, the G-7 nations decided to intervene to weaken the yen and help the Japanese economy at these troubled times.

But the intervention wasn’t equal on both sides of the Atlantic. The European effort began earlier in the day, with at least three participants: the German central bank, the French central bank and the European central bank led by Jean-Claude Trichet.

These institutions bought EUR/JPY, and triggered the breakout of EUR/USD above 1.4030.  EUR/USD continued quickly above this line and reached 1.4140 – 1.4150 and couldn’t proceed past the 1.4160 line.

Trichet II

And then Trichet made a second move. Speaking at a conference, Trichet expressed again his famous “strong vigilance” about inflation, reassuring that the plans for a rate hike in April are unchanged, even in the light of the terrible Japanese earthquake that weakens global demand.

So we got another breakout, with Euro/Dollar at 1.4173 at the moment. The next and very important level is 1.4282, last seen in November and the highest level in a year.

The market continues to disregard the negative impact of the rate hike and the debt crisis that will soon see Portugal take a bailout.

For more technical levels, see the EUR/USD Forecast.