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Veni, vidi, I didn't tap; EUR/USD falls to 1.2850

FXstreet.com (San Francisco) - The EUR/USD traded lower on Wednesday as market was concerned about the life of the QE. In his testimony, Federal Reserve Chairman Ben Bernanke repeated that the QE is linked to the economic data. No clear hint, but later the FOMC minutes showed that the board will discuss tapering in June, suggesting that the central bank is divided on what to do on stimulus.

The EUR/USD closed its first negative day of the week as the pair was rejected by the 1.3000 level to break down the 1.2900 area and to close around 1.2850. The pair is 0.36% down from Wednesday open and the short term perspective is slightly bearish in the 1-hour chart according to the FXstreet.com trend index. Indicators such as MACD, CCI and Momentum are pointing to the south while the Stochastic is bullish.

As for the short term, a breakdown of 1.2841 (low May 21) would aim for 1.2809 (low May 20) and then 1.2796 (low May 17). On the flip side, resistance levels line up 1.3011 (MA21d) followed by 1.3030 (high May 14) and then 1.3051 (high May 10. "In the 4 hours chart a stronger bearish tone is developing, although 1.2800/40 area continues to attract buyers, and only a clear acceleration below these last will point for a stronger downward move," comments Fxstreet.com analyst Valeria Bednarik.

Neither one thing nor the other, but the opposite

Veni, vidi, I didn't tap. The highly awaited Federal Reserve chairman Ben Bernanke testimony on QE wasn't like the market expected. Or yes? The Fed sent a pretty mixed message to investors this Wednesday, in regards and when and if QE will come to an end. But, somebody expected anything else? Bernanke commented the situation in the same way Dudley, Bullard and other FOMC members did it in the past: That policy could go either way depending on how the economy plays out.

"Is the QE tapering a reality or rumor?" asks Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank. Starting with the St Louis Fed's Bullard, who is not generally known for his dovishness, remarked that the Fed should "continue with the present QE program" because it is the best available option for policy makers to boost growth. Bullard added that he doesn't see a good case for QE tapering unless inflation risks pick up.

However, the chairman commented that the central bank could reduce its bond buying pace "in the next few meeting." The FOMC minutes confirmed that the topic will be discussed in the June meeting. Among these lines, BK Asset Management analyst Kathy Lien believes that "the Federal Reserve plans to reduce monthly bond purchase in September. Fed President and FOMC voter Dudley was a bit more specific than Bernanke this morning - he said it could be 3 to 4 months, which puts us right into the next meeting with a quarterly press conference from the Fed Chairman."

The QE is here to stay... or not. No matter journalist, leaders or politicians say, just pay attention to economic data, as pro market players has been doing in the past 100 years. This is the clue.

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