The EUR/USD continued to flirt with the 1.45 level after seeing strong buying interest overnight.

A culmination of bullish European and bearish US headlines saw the pair trade to an overnight high of 1.4515. Positive comments from Jean-Claude Trichet and German chancellor Angela Merkel, effectively throwing their support behind the euro were initial catalysts. A well received bond auction in Spain that helped ease concern of contagion, (with the end result being a lowering of Spanish yields across the curve) also influenced the cross. Just when some traders were feeling the euro was on a one-way ticket to 1.46, the EU commission came out and denied earlier speculation that there was an agreement in place for a new Greek plan, which caused the euro to weaken back towards support at 1.4455.

On the other side of the equation, the comment from Moody’s that it could put the US on possible review unless there are visible inroads for a solution on the debt ceiling, was enough for the USD to bears return, after earlier seeing another weak print on the initial jobless claims. During Asian trade, the EUR/USD moved between 1.4478 and 1.4518, with participants reluctant to push up prices ahead of tonight’s US non-farm jobs reports. Greek prime minister George Papandreou is expected to discuss the EU/IMF review findings of the proposed €78 billion in asset sales and austerity measures, which, if positive, could provide a further boost to the euro.

How the EUR/USD trades on the jobs number is open to contention, with some traders suggesting if the non-farm payrolls come out stronger-than-expected, we could see some USD strength. However, others are suggesting we could see a strong risk rally on the back of a good print, so keep an eye on the price action to see how the market interprets the data. In the short term though, we could see the pair target 1.4570 (61.8% retracement of pullback from 1.4935 to 1.3975).