When the mood got sour in markets this week, the yen had the starkest response, breaking the BOJ’s “line in the sand” and continuing on and on. And what about the euro? It certainly lagged behind, getting stuck at resistance at 1.1215.

It had the ECB in mind: Mario Draghi promised action in March and this seemed to have slowed the moves. But this didn’t last too long: EUR/USD made a break to the upside and only temporarily paused at 1.13. The pair has reached the next resistance line at 1.1340, and perhaps already has its eyes set on the veteran 1.1375 level.

Moving even higher, we have the 1.1460 level, which capped the pair several time in 2015, followed by the round 1.15.

(Click on image to enlarge)

Why is EUR/USD rising?

The euro enjoys the boomerang effect from the ECB: cheap money via a negative deposit rate and outright money creation at a rate of 60 billion euros a months sends money in search for riskier assets abroad.

And when those assets, such as those in emerging markets become risky? Money is repatriated. It happened in Japan so many times and is seen also now.

And today there are other specific triggers — more coming

The fall in oil prices is good for European consumers: the old continent imports oil. However, there are companies in the same old continent which make money out of oil and banks who are exposed to those companies. This created worries all over the world.

The fresh fall in oil prices below $30 is not a first, but after oil held high at first and the euro did not jump, now both are on the move: WTI is at the $28 handle and EUR/USD at the $1.13 handle.

Hawk goes dovish – market ignores

But what’s hard to understand is the other impediment on the euro: the ECB. When markets ignore a dovish Draghi repeating his own statements, that’s understood. But why is the market ignoring a hawk gone dovish?

Jens Weidmann, the president of the German Bundesbank, also joined the chorus in talking about action in March and did not the deterioration in conditions and in the outlook. This is very different from the “we already did too much” stance he had before, and the stark opposition to QE.

But the euro went further up.