1.2700 coincidentally is the 50% of the Fibonacci uptrend retracement level that buyers may be looking to enter as asset backed securities buying attracts investors betting on a full on QE for the ECB
The European Central Bank (ECB) returned to the market for the 2nd day of asset purchases, this time round targeted at Italian covered bonds. This is after the ECB bought short dated French notes and Spanish securities two days ago, as part of the plans unveiled last month to bolster companies’ and households’ access to financing. ECB President Mario Draghi intends to expand the bank’s balance sheet by as much as 1 trillion euros to stave off deflation in the Euro zone.
A support at 1.2700 today will be key to determine if the EUR/USD will fall beyond 1.26 towards the low of 1.2500 this year. On the upside, 1.2848 yesterday was retested and resistance held firm as the pair fell as the market wavered on whether the ECB is doing enough to curb deflationary woes in the Euro zone by their latest policies, as a recession probability keeps investors off the Euro.