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Forex: EUR/USD fell to 1.3000 after its worst single day decline since Feb 25

FXstreet.com (San Francisco) - The Euro traded heavy on Wednesday against the US Dollar, down 1.10% after reversing Tuesday's reversal of Monday's. The EUR/USD collapsed from the 1.3200 region to break down the 1.3030 support, test the 1.3000 frontier and close back above the 1.3030.

Today’s decline has been the second worst single day drop for the EUR/USD in 2013 after the February 25 collapse. Now the pair is slightly bearish at 1.3030. As for the short term, Indicators such as MACD, CCI and Momentum are pointing lower while the Stochastic is bullish. Next support is 1.3000 (intra-day low) ahead the 1.2963 (low Apr. 8) and the 1.2900 level. On the upside, resistance levels align at 1.3202 (high Apr. 16) ahead of 1.3229 (50% of Feb. -Apr. slide) and finally 1.3319 (high Feb. 25).

The EUR/USD was weighed by strong risk aversion and Weidmann dovish comments on the possibilities of a lost decade in Europe and about an ECB rate cut. The Budesbank president said that "Overcoming the crisis and the crisis effects will remain a challenge over the next decade." He also hinted a ECB rate cut soon in case of more gloomy economic data in the Eurozone.

In this line, BK Asset Management's analyst kathy Lien points that "the ECB is a central bank that likes to prepare the market for any potential changes in monetary policy and that is why Weidmann's comments are so important because it could be the first of many to follow." As widely expected, "a rate cut is clearly on the table and if data confirms the need for additional easing," however, "the ECB may not hesitate to cut rates especially with the recent decline in commodity prices, which reduces inflationary pressures," states Lien.

So, market could wait more pressure for the Euro in line of ongoing rate cut talks. UBS analyst team commented in a recent report that as "part of the explanation for EURUSD to fall is softer commodity prices which support the greenback. Part of the explanation is Bundesbank President Weidmann, who discussed quite openly the option of a rate cut. This is a first signal that the German economy might worsen. Finally, worries about Italy remain an issue", they comment.

After looking for EURUSD to break the uptrend for a couple of weeks now, UBS stated that "it finally happened" and accordingly, the bank continues "to expect EURUSD to go towards 1.26".

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