EUR/USD broke a tough resistance line that capped it for some time and then bounced off higher resistance. The pair is at the highest level since July 4th, a new 8 week high.
Optimism about an upcoming solution in Europe and regarding potential hints of QE3 by Ben Bernanke fueled the rally. With even chances of a disappointment from the Chairman and the proximity of the pair to important resistance, do we have a selling opportunity?
Update: Ben Bernanke didn’t supply big hints, but some saw the defense of previous QE operations as a hint towards action. Nevertheless, while many currencies gained against the dollar, the euro fell.
EUR/USD was capped under 1.2587 throughout most of the week. This is a veteran line that worked in both ways. The move higher sent the pair to tackle the January low of 1.2624, but the pair couldn’t break higher. 1.2624 served also as resistance after being broken, and is now a stubborn line. This line could hold in a better manner.
The dovish FOMC meeting minutes suggested hints about QE3 as seen in 2010. The improvement seen in the economy since that meeting and comment about them being “stale” suggest a disappointment like in 2011. Bernanke could disappoint by sticking to the title of his speech, which seems to lean to the past.
On the other side of the Atlantic, we heard some strong words: “There’s no Europe without the euro” from ECB member Benoit Coeure, who also stated that the ECB is ready to whatever is needed.
The optimism about action i the euro-zone seems justified, but the optimism about Bernanke (which hurts the dollar also against other pairs) could be exaggerated. We’ll know soon enough.
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