During Thursday's trading session, the single European currency broke down an important support level at 1.0500, but rebounded afterwards and is currently trading in a range of 1.0600-1.0550. According to forecasts, EUR/USD quotes may drop to a level of 1.0000 due to the launch of the QE program. Whether or not the ECB will be able to hold back deflation by use of its printing press is questionable, but the falling euro can boost demand for European goods worldwide and increase trade balance surplus, which will have a positive impact on the euro.
It should be also noted that latest French statistics have not been very optimistic, confirming that the European economy is approaching deflation. For instance, consumer price index fell to -0,3% year-on-year in February. According to preliminary forecasts, annual inflation will not rise above zero, but will probably reach a level of 1% next year.
February's data on US producer price index is worth particular consideration today. If they turn out to be positive, the FED will have another signal to raise interest rates, which will put additional pressure on the euro.
Support and resistance
The nearest resistance level is still 1.0742 (4/8 Murray)
The nearest support level is at 1.0498 (2/8 Murray)
Go short after a level of 1.0550 is broken and place protective orders near a level of 1.0580 with a target at 1.0432.