Traders' hopes to see a shift back to the upside for EUR/USD have been crushed between yesterday's (Wednesday) unexpectedly less dovish tone from the FOMC minutes and today's lackluster manufacturing and services eurozone PMI prints. As a consequence, the single currency is currently extending its descent below the psychological mark at $1.3200, consistently intensifying the bearish sentiment surrounding it.
… Green hurricane
Market participants are still surprised after the FOMC's release. Although a supportive and short-lived tone for the greenback was somehow expected, the deeper remarks of the committee members transformed everything into a spiraling buying interest for the U.S. dollar, badly hurting the high-beta currencies, commodities and risk-associated assets in general.
How long will this USD strength last? Well, balancing the opinions that this is a momentary move, or even for those signaling an opportunity to go short the USD, this seems to go beyond. It would not be only the dollar being stronger, but also the domestic entourage of the single currency that would be accentuating selling pressure. It is worth recalling the poor recent data from the euro area in combination with ECB's Mario Draghi's late comments, implicitly targeting the euro exchange rate.
In addition, the uncertainties regarding the final results in both the Italian elections due over the weekend and the U.S. 'sequester' pose the immediate headwinds for the euro, consequently bolstering the USD momentum.
At the moment, the cross is navigating the area around $.3180/85, slipping into the daily cloud at the same time. It is worth noting that the recent steep decline has breached two uptrend lines - one set from July 2012 lows and the other one from November 2012 lows - indicative of a potential shift in the trend. The interim support lies at $1.3143, where sits the 100-day moving average, followed by the area around $1.3040/70 (38.2% of the Fibonacci retracement from July 2012 lows - February 2013 tops).