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More Low On Eur
By Benny Nardino | October 22, 2008
There is no hiding place for the euro as EURUSD hit 22-months low in overnight Asian trading session an indication of more signs of weakness. The current market fears rest on the turmoil of the past weeks as confidence grow thin on recession aversion. Will this be the moves that creates parity for the pair again?
After yesterday’s trading European trading session we pegged our support to 1.2848 as seen on the chart but this level has since been violated.
At the moment we are looking at the 1.2477 as our next targeted support level. Part of the recent slide in the EUR has been one of the reasons it appreciated a few years ago - flow of funds.
The US stocks which have been heavily traded down to oversold may yet prove the catalyst to economic turnaround. Many foreign investors are beginning to see much value in these stocks again and thus causing money back to the US. A cheap dollar brings high affordability. These stocks that were once frown upon as overpriced to foreign investors suddenly looks attractive again.
It is ironic that this same process happened to the US economy when Bush started Iraq war a few years ago which brought America to its present heels. The euro dollar appreciated significantly on the back of that. With the euro-zone rattled by recent events and fear of recession looming traders are running for the hills. Coupled with the likelihood of Obama presidential sentiments, the US suddenly look a fertile ground again.
The euro bleed is not likely to stop for now until parity are drawn between euro and dollar pair, EURUSD. We are looking at a possible 1.20/22. These were levels we have been warning you off since March 2008 when EURUSD traded 1.58/60. In addition with the present economic conditions, it would not surprise us, if November 2005 low of 1.1640 is seen again.
Finally, recent weeks and months of global financial crises have finally hit the Europe’s streets. People are now openly discussing their fears of the recession, with Job numbers down, 17-year high, families spending on essentials and people cutting down on riotous living, this does not looklike a season going away soon. The impact of this on the euro economy is that sales numbers have plummenting as shoppers abandoned the high streets. Our analysis shows that it will take a little while before recent banking recapitalization begins to work. Until then, welcome the the ride of your life in decades.
Trade with caution and have a great day.
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