As core eurozone member countries such as France and Italy continue to grumble about the euro being too strong, the single currency has continued to soar, nearly reaching 1.4000 vs. the USD this morning:

EUR_USD_Daily_5.8.2014

However, following this morning's comments by Mario Draghi the euro has taken a tumble:

“The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,”

The 50-day simple moving average and important support/resistance near 1.3825 will be an important test for EUR/USD. Should this area of potential support be breached, we could be looking at a much larger correction for the euro currency.

While there is certainly ample room for a further 200-300 pips of downside from current levels, a strengthening eurozone economy will likely incite fresh fund flows to euro area capital markets which should support EUR/USD on declines. Therefore, 1.40 may be a short/medium term peak for EUR/USD exchange rates it is exceedingly unlikely that we will see a fall below 1.3500 anytime soon.