The December Euro is under pressure this morning triggered by a mass exodus of concerned investors. Traders are selling the Euro after European Union policymakers failed to end concern that Italy and Spain would succumb to a sovereign debt crisis that forced Greece, Ireland and Portugal to seek bailouts.
Last week’s interest rate cut by the European Central Bank weakened the Euro against other foreign currencies since it took away the interest rate differential edge it had on these countries. Although technical factors suggest the market is oversold, the fact that the last bottom at 1.3212 has been violated means that the main down trend has been reaffirmed. This doesn’t mean the Euro cannot have a rebound in the form of a short-covering rally, but what it most likely suggests is that the single-currency is headed to and perhaps likely to penetrate the October 4 bottom at 1.3142 over the near-term.
Besides the monetary policy easing, pressure on the Euro is also mounting because of an expected lower growth outlook. Economists are predicting the Euro Zone’s economy will expand 0.5 percent next year. Compared to the U.S. expected growth rate of 2.19 percent, the Euro is definitely at a disadvantage. With growth prospects expected to continue to decline, the ECB will probably be encouraged to continue to slash interest rates. This should keep the pressure on the Euro which could accelerate a decline into 1.20 over the intermediate term.
For further information on our services, visit http://patternpricetime.com
