Euro forecast: EUR won't dip below 1.3475; beware of strengthening US dollar

The euro dollar exchange rate is trading 0.93 pct lower than it was at last night's closing level.

Meanwhile the euro pound exchange rate is 0.97 pct lower at 0.8484.

(PS: The above are spot market quotes; your bank will affix a discretionary spread to the figures when passing on a retail FX rate. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more FX. Please find out more here.)

Support for the euro is forecasted

So, things have clearly gone a bit sour for the shared currency today.

"The currency is in the midst of a nosedive against the U.S. dollar that began 3 days ago.  The sell-off gained momentum when investors realized that the Fed was less dovish and the ECB more dovish than they had previously anticipated," says Kathy Lien at BK Asset Management.

In addition there were the eye-opening data releases that came out this morning - inflation has fallen dramatically while unemployment is up.

Markets are betting that the ECB will now take some form of action which is seen as an Euro-negative event.

Where will the bottom of the decline be for the euro?

"Support in the EUR/USD is at 1.36 and even if this level is breached, we do not expect the currency pair to trade lower than 1.3475," suggests Lien.

Forecasting a return to form for the US dollar

An interesting note from Camilla Sutton at Scotiabank on the possibility of a return to form for the US dollar:

"We would caution USD bears that with both the WSJ and FT (see suggested readings) out with articles suggesting that a December taper is a real possibility there is some added upside risk to the USD, particularly since the market is now positioned for a H1 2014 taper.

The FOMC last night signalled that the Fed sees financial conditions having eased, a vague improvement in the labour market and noted a softening in the housing market.

This was enough to generate a brief USD rally, which subsequently has been erased, with the exception of EUR of course.