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The EUR/USD traded higher on Wednesday and recovered some ground from Tuesday's lows at $1.2840 to test the $1.2975 level, MA 200 hours, but the movement wasn't strong enough and the pair retraced to close just above the $1.2930 price.

Investors digested the Cyprus rejection of the EU bailout and the worse than expected European consumer confidence. As Kathy Lien, BK Asset Management's analyst, says, The country's fiasco will continue to affect EUR/USD flows," but the focus on Thursday will "shift to economic data and the underlying fundamentals of the region's economy."

When the pair was at $1.2975, Ben Bernanke and the Fed came into action with their improvement in the unemployment forecast but the cut in the GDP expectations. Overall, the market assumed that the Fed will keep stimulus going until 2015 at least. This last fueled the USD and USD/JPY rocketed to trade above 96.00 level and the EUR/USD fell to the current levels.

The Fed has lowered the unemployment projection in 2013 to a range between 7.3% and 7.5% from 7.4% to 7.7% expected in December. In 2014, the rate will drop to a range between 6.7% and 7.0%. In 2015, the rate is expected at 6.0%-6.5%.

On GDP, the Fed cut slightly the economic outlook for 2013 to the 2.3% to 2.8% range from the 2.3% to 3.0% expected in December. In 2014 the new range will be 2.9% to 3.4%, below 3.0% to 3.5% expected in December.

Chris Tevere, analyst at, points that "Interestingly in his Q & A, Bernanke stated the FOMC may adjust the "flow rate" of QE purchases… but won't adjust this "flow rate" every meeting or frequently, but rather when they see the economy has improved in a meaningful way." That said, continues Tevere, "he failed to indicate what he believed was a 'meaningful' improvement. He further added that there is a "considerable interval" between the end of asset purchases and interest rate hikes."

Back to currencies, Scotiabank believes that the euro perspective remains bearish. "The focus remains on Cyprus, the precedent its bailout potentially sets and the impact of weak political system in times of crisis. The parliamentary vote for the bank levy bail‐in failed to produce even one favourable vote, complicating the outlook for Cyprus even as markets are relieved that guaranteed depositors remain protected", pointed out Camilla Sutton, Strategist at Scotiabank.

As for the short term, the pair is facing the next resistance at $1.2973 (high March 20) ahead of $1.2980 (MA 200h) and finally $1.3046 (MA 21 day). On the flip side, a break below $1.2900 (intraday support) would expose $1.2844 (low March 19) en route to $1.2827 (low November 22).

Heat Map euro dollar

The day after the Fed

As noted before, the focus on Thursday will shift into economic data and regional PMIs. "Economists expect service and manufacturing activity in the Eurozone to improve, leading to a higher eurozone PMI composite index," comments Lien. "If the data surprises to the upside, reassuring investors that there are still areas of growth in the eurozone, the currency pair could extend its gains."

PMI data in China, Germany, the Eurozone and the US will catch the market attention. But also UK retail sales and US leading indicators, housing data and the Philly Fed Manufacturing index.

  • HSBC Manufacturing PMI

  • German Manufacturing PMI

  • U.K. Retail Sales

  • U.S. Existing Home Sales

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.