Finally there was a rebound on Tuesday afternoon for EurUsd on the foreign exchange market, after halting many days and weeks of declines, and testing the year low at 1.2440 early this week. However, normal service resumed today, with a fall starting late in Asian trading which retraced all of yesterday’s gains.

Overall, the underlying trend of EURUSD remains under pressure by the increasing divergence in monetary policies of the ECB and the Fed.

Expectations of monetary policy explain this movement. Traders are worrying on the possibility of a new announcement from the ECB on Thursday, while it is clear, from news last week that the US central bank will begin raising its key rate towards mid 2015. In addition, the ECB should not change its policy at its meeting on Thursday.

This difference is also reflected at the macro level. As part of its autumn forecasts, the European Commission has also this morning reduced its forecast for GDP growth for 2014 from 1.2% to 0.8% for the eurozone.

There is little data being published this morning in Europe. Prices for industrial production rose 0.2% for September 2014 compared to August. This does not include the energy sector, however, as they fell 0.1%.

From a technical point of view, the lows made on Monday (the first trading day of November) are a significant level. If that breaks down there could be further weakness in the Euro. Looking at a weekly chart there is nothing much in the way of support between that low and the lows of 2012, around 1.2100. The only thing in the pairs favour is that the US Dollar has now reached a high which is headed towards areas not seen for the last 5 years. At some point, it should stall, for a while maybe.