The EUR/USD originally had fallen during the Wednesday session as the markets were quite weak. However, the Federal Reserve has decided to keep rates ultra-low until the end of 2014 now, and this pushed the Dollar down against almost everything towards the end of the session.
The pair has been grinding higher over the last couple of weeks, and it looks like the bearish trend has been broken at this point in time. However, it must be kept in mind that the Europeans haven't exactly fixed their issues. None the less, Mr. Bernanke was more than willing to buy them some extra time as he effectively pressed the sell button on the Dollar himself.
The markets liked this as risk assets all rose in value as is often the case in this situation. The easing also may not end there, as Mr. Bernanke also mentioned that additional easing could be done if necessary. The pair is simply reacting to the weak Dollar policy that the United States presently is pursuing, and as a result the Euro got a bump for the session.
The breaking above 1.31 is a significant event, and this suggests that we will see 1.33 fairly soon. The pair is now a buy on the dips pair for us, even though we are very leery about the European Union as a whole now. The Dollar has just become an asset that can't be held in general. As a result, we are selling it against many commodity currencies, and although the Euro isn't one - it will continue to rise because of the market-wide Dollar selloff that we are going to see over the longer-term.
We are long only as long as this pair stays above 1.3050 or so, and won't sell it until we close below the 1.29 level on a daily chart. The 1.35 level also looks as if it could be an area to watch out for going ahead as well. The dips are now to be bought, at least until the next flub in Europe between the participants.
EUR/USD Forecast January 26, 2012, Technical Analysis
EUR/USD Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3