Category: Euro

Euro bulls has a disappointing hugely unprofitable day on Thursday, July 3th, with the release of the ECB interest rate decision and the US NFP data.

Even though the ECB increased the interest rate as expected to 4.25% and the NFP job loss figures at 62,000 were as expected the Euro made a stunning reversal of over 200 pips from its high of 159.09 reached immediately after the ECB announcement and closed below 157.00.

The Euro made a new two month high above 159.00 and within minutes was trading at a stunning weekly low. Of course the problem was that the ECB rate increase to 4.25% and the NFP figure were widely expected. The Euro had advanced on the anticipation and sold off almost immediately with the news. There really should be no surprise in that trading pattern as you see it over and over again. The surprise was in the degree of the sell off.

While one can not say that a long term high was put into place such a strong violent reversal should put one on alert that a reversal is a possibility. Perhaps we will see the Euro trade back down into the 154.00 region and will be able to make a better call from there.

For now I would be wary of being too bearish on the US Dollar. While all of the news is bad the price action on Thursday and while the US market was closed on Friday should be respected.

Perhaps a Euro reversal is in the making. Next week’s trading pattern should make that clear.

The Euro Dollar was adopted as a unit of exchange in January 1999. Those who advocated the currency believed it would strengthen Europe as an economic power, increase international trade, simplify monetary transactions, and lead to pricing equality throughout Europe.

The Euro zone does not run a huge trade deficit nor is it heavily indebted to the rest of the world like the US and interest rates in the Euro zone are also significantly higher. The Euro-zone has a larger share of world trade than the US and is the Middle East’s main trading partner. The Euro is divided into 100 cents, sometimes referred to as euro cents , especially when distinguishing them from other currencies or the former currency in a particular country. All circulating euro coins including the commemorative coins have a common side showing the denomination, value, with the old 15 EU-countries in the background. The Euro will certainly simplify the prevailing situation in Europe before the Euro of having to exchange currencies as you travel about Europe.

The Euro-Atlantic Partnership Council will provide the overarching framework for consultations among its members on a broad range of political and security-related issues, as part of a process that will develop through practice. The Euro is a credible challenger to the US Dollar’s position as the world’s premier reserve currency. Euroland is roughly as big as the United States, and the Euro has shown itself to be a much better store of value than the dollar. The Euro was first adopted on 1 January 1999. Euro notes and coins came into circulation on 1 January 2002.

The Euro Dollar strong uptrend continues today as the preliminary October University of Michigan survey disappoints Dollar bulls. The U. Michigan survey was reported at .82 compared to an expected .84.

The Euro Dollar experienced a brief correction immediately after the better than expected Non Farm Payrolls report last Friday, hitting a low of 140.16 on Tuesday, Oct. 9 two trading days after the data was released. Since then the Euro has pushed forward and is trading at 141.70 as I write.

The US Dollar remains in a pronounced downtrend that will likely persist for quite some time. Do not be surprised to see the Euro trade up to 150.00 or so before the US Dollar is able to manage anything more than occasional corrections in a long term downward trending US Dollar market.

The Euro Dollar surged to as high as 139.89, an all time high against the US Dollar, after yesterday’s US Federal Funds and Discount Rate cut of 50 basis points, the Euro remains firmly in the 139s. As I write the Euro is at 139.65 and looks to be gathering strength for a push for 140.00 and perhaps well beyond.

The unexpected cut of 50 basis points, most market analysis were expecting a 25 point cut, has cut the legs out from underneath the Dollar, at least for the short term. With the US Dollar Index level of 80 being broken it certainly looks like the course of the Dollar will be downward for some time to come.

We have not reached a panic stage of any sort yet so I expect that the downward move for the US Dollar and the upward push for the Euro has some distance to go. Should the US economy enter into a recession that distance may become very far indeed.

For now trading Euros from the long side looks to be a good bet. As we are moving into uncharted territory the price action is likely to be choppy as the market adjusts to all time high levels but the trend is certainly up for the Euro against the US Dollar.