The main factor that determines the value of any currency is cross border trade flows. For example, if you have a competitive economy and you export more goods and services than what you import, then at the margin, there will be a greater demand for you currency in the FX market. As long as a country has positive trade flows, its currency will appreciate.
Some people think that if Super Mario prints euros to buy Spanish and Italian debt, then the currency will be diluted and fall in value. Well that's not exactly how things work. Japan is a perfect example of why money printing won't reduce the value of a currency.
The only determining factor for the value of the yen is what happens at the margin in the FX market. It does not matter what Japan does in her own borders, for as long as Japan has a positive current account with the rest of the world, the value of the yen will go up. Therefore the Bank of Japan (BoJ) can print all the money in the world to build bridges and roads that no one will use, with no negative effects on the yen. Of course the Bank of Japan offsets most of those flows buying US Bonds, but that's another story.
Europe for the most part has a trade surplus with the rest of the world. The trade balance with the US alone was positive to the tune of about $119 billion in 2011, according to US census data. What this means is that the ECB (like the BoJ) can print all the money in the world and the value of the euro will not be compromised, due to those positive trade flows.
However, trade flows are not the only thing being traded at the margin in the FX markets. There is also the issue of investment flows. Money that flows around the world seeking higher yields and or investment opportunity.
In the case of Japan, very few people have yen or are invested in Japan. That means that even if a very big portion of those investors who hold any kind of Japanese securities decide to liquidate their holdings and take their money out of Japan, it will probably not have much of an effect.
In Europe's case however, foreign residents and institutions holding European securities of any kind are vast. As such, what these people and institutions do with their money, is what dictates what the EURUSD will do.
The next question is, what factors might make foreign investors withdraw money from Europe?
The answer to that is simple and it isn't other than a EU break up. If investors think that Europe will break up, then they will take their money out of the euro-zone and change it to Dollars or Swiss Franks, because you don't want to be locked in drachmas or pesos if suddenly the euro were not to exist.
However, in the absence of a euro break-up scenario, there is probably no reason to take money out of the euro-zone, except if one has found a better investment jurisdiction.So in this case, printing more euros and buying Italian and Spanish debt, assures the market that Italy and Spain will not default and that is a green light for international investors (and European investors also) that the waters in Europe are safe for now.
The bottom line is:
Policy and actions that assures the markets that Europe will not break apart is bullish for the EURUSD. If the issue of a euro-break up is resolved once and for all, I think that there would be massive inflows into Europe and the value of the euro will probably return to 1,60.