Despite a euro setback on Wednesday morning after reports that markets may have misinterpreted ECB President Mario Draghi’s Tuesday comments that seemingly hinted at impending ECB tapering, EUR/USD quickly reversed those earlier losses and began to climb once again. This climb extended Tuesday’s dramatic surge above the key 1.1300 level that was initially driven by Draghi’s perceived hawkishness. In the process of extending its rise on Wednesday, the currency pair hit a new one-year high just short of the 1.1400 level.
Contributing substantially to this rise was a further-weakened US dollar that has not been able to make any meaningful rebound or recovery lately despite a recently hawkish-leaning Federal Reserve. In addition, expectations remain that the ECB may make some kind of tapering announcement in the next several months. This speculation over a potentially hawkish turn by the central bank in the wake of Draghi’s comments on rising inflation has helped to keep the euro supported.
Technically, as noted, EUR/USD has confirmed a key technical breakout above the 1.1300 psychological level. This also confirms a continuation of the bullish trend since the beginning of the year. With any further dollar weakness and continued support for the euro above 1.1300, the breakout has a potential to extend towards the next major upside target around the key 1.1450 price region. With any further breakout above that resistance, a further resistance objective can be found at the 1.1600 level, last tested over a year ago in May 2016.
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