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EUR/USD is playing with the critical 1.2624 line – this was the previous 2012 low, set in January.

The background is the hope for a smooth bailout for Spanish banks and hopes that Bernanke will provide a clear hint for QE3 in his testimony. Could it be a “buy the rumor sell the fact event”?

EUR USD at critical resistance June 7 2012
EUR USD at critical resistance - Click image to enlarge

US long term yields are very low, and buying more bonds with newly printed dollars will not help. However, with the situation in Europe worsening and an urge for the Fed to “do something” in the absence of political leadership everywhere in the globe, Bernanke could supply a hint about easing for the June 20th meeting – right after the Greek elections.

The pair broke under 1.2624 in May, this line was a clear separator. The pair went as low as 1.2288 before beginning a nice recovery. A convincing climb above 1.2624 is a bullish sign.

For more, see the EURUSD forecast.

Update: the pair didn’t really break this level yet, but rather retreated back before the statement.