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Euro Makes Further Low
By Humphrey Bo | October 16, 2008
LONDON: The euro fell to a 20-month low against the dollar on Friday as traders examine unilateral government packages for their banking problems in Europe. In recent weeks, we have seen a tidal wave of euro selling but at what point will the euro-zone economists review their policies?
It’s exactly two weeks ago since we published “Euro Makes Low And More..” . At that time, it seemed further away from reality to making such calls when the market was trading at 1.38/1.40. But today we are trading at those levels. As seen on the chart, overnight trade saw the EUR sell-off against the dollar, USD from a healthy level of 1.3516 from yesterday’s trading session to retest the 20-month low.
Early morning trading in the Euro session has seen the euro languishing within the 1.3320/3745 fulcrum. Traders remain tentative until the US macro economic reports coming up later. Looking at the current market condition and economic climate, we are looking at a market still very vulnerable further decline. You’ll have to go back to March 2007 to find 1.3250 but we’ve seen these numbers in October 2008.
Considering these factors we beginning to conclude that ECB would allow the euro to slide to parity with the dollar again as they would not want to unsettle the market. Another factor being the rise in unemployment across Europe. With manufacturing orders down it would also be an economic suicide for ECB to derail further hope.
In conclusion, there may be further vacilation between 1.33/1.37 but we anticipate decline to somewhat 1.20/1.25 range before any major bounce.Trade with caution to preserve your capital and have a great day.
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