DBS Research Group just released an event chart that explains the movement of EUR/USD.  The chart, seen below, goes back to April 2010.

In 2009, EUR/USD rallied on the back of strong global GDP growth rates.  It ended the year at 1.4329.  In early 2010, China’s bank reserve ratio hikes dampened global risk sentiment. Meanwhile, the Greek debt crisis was brewing.

By April 2010 (when the DBS chart begins), EUR/USD had fallen to 1.3500 and the Greek debt crisis was plastered on the front pages of every major financial publication.

EUR/USD bottomed June 7, after Greece received their bailout loan.  Shortly after the bottom, China announced it unpegged the yuan from the US dollar. This may have been responsible for sparking a long-term rally.

Throughout the Greek debt crisis, China had voiced its support for the euro by stating its commitment of having euro-denominated assets as a part of its diversified portfolio in foreign exchange reserves.  When it depegged from the dollar on June 20, it probably would have had to diversify out of some of its dollar-dominated assets into euro-denominated assets, thereby buying up euros.

Billionaire investor George Soros said buying from China was what saved the euro from falling apart.

In September the Federal Reserve signaled its intention to roll out a second round of quantitative easing, which triggered a rally in EUR/USD.  Shortly after, the Irish debt crisis played out and pushed down EUR/USD.

Fast forward to March 2011, ECB Chief Jean-Claude Trichet signaled a rate hike and EUR/USD surged.  Today, after the ECB followed through with a 25 basis point rate hike, EUR/USD stands at 1.4348, almost the same level it did at the beginning of 2010. 

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