The weakness in the EUR USD was confirmed overnight with thecontinuation of the downtrend. This market appears to be acceleratingto the downside now that the last swing bottom at 1.3113 has beenbreached.
The weakness in the EUR USD was confirmed overnight with the continuation of the downtrend. This market appears to be accelerating to the downside now that the last swing bottom at 1.3113 has been breached.
Short-sellers have to be careful near 1.2945 as this price represents the Fibonacci retracement of the last rally. There is the possibility of a short-term bottom at this price as profit-taking may trigger the start of a short-covering rally.
A short-covering rally would not indicate a change in trend, but could lead to the set up of another selling opportunity.
The Euro Zone continues to show signs of a contraction in the economy. News that inflation is dropping is causing traders to believe that the worst is yet to come.
The economy isn’t the only issue hurting the Euro. Investors are losing confidence in the European Central Bank’s ability to pull the Euro Zone out of the recession because of policymaker indecision.
Some ECB policymakers believe that interest rates should be allowed to fall under 1% in order to stimulate the economy. Others want to keep rates at 1% or higher because they fear banks will lose their incentive to make loans to each other.
Without a clear path to follow regarding the next interest rate action in May, investors are choosing to bailout of the Euro.
The Euro could be entering the most important time period in its 10-year existence. Issues regarding interest rates, the weakening Euro Zone economy and the mounting financial problems regarding the European Union could keep tremendous pressure on this currency from now until the next ECB meeting on May 7.