The EUR came under a lot of pressure in yesterdays trading session continuing the declines from the previous day. It seems we’ve now broken out of the range bound activity. Indeed, EUR/USD at the beginning of the week was trading at 1.4550 and has now come under the 1.4250 level breaking through various support levels and looks set to continue its downward trend. GBP/EUR on the back of this move has continued it’s upward climb and is now firmly back in the 1.13s with the potential to look at the 1.14 level. If you’re a buyer of Euro’s putting an order in at 1.14 may be a good idea as we’ve seen the pair hit this level and come off straightaway again on numerous occasions.
Traders will be cautious on the EUR/USD cross today as we have the Non Farm payrolls report out from the US this afternoon (UK time). Any figure that comes in under expectations (the US are expected to post a net volume of circa 90k jobs) could lead to fears about a ‘double dip recession’ for the US economy and we could see EUR/USD retreat on the back of this. However, I think we’ll see further pain for the EUR in today’s trading session.
We have PPI out of the Eurozone which is expected in at 6.2% compared with the previous figure of 5.9% so this may give the EUR some short term respite from the intense selling pressure it has come under.
The markets focus as mentioned earlier will be on the US this afternoon. Expect a lot of volatility today due to recent trading sessions. This will give us for the first time in a while a clear direction on the EUR/USD pair and subsequently GBP/EUR. If the EUR/USD comes under selling pressure this afternoon then it could be the catalyst for the EUR to return to ‘fair value’ levels, in my opinion of sub 1.40, pushing the GBP/EUR pair higher.
The devaluation of the EUR has been on the cards for a long time and poor manufacturing figures, recent statements from ECB figures, the Greek situation, a general downward leaning in sentiment in the Eurozone, debt restructuring, France, Spain, Italy and poorly received bond auctions may now be coming together to put the pieces of the jigsaw together resulting in a clear, and realistic value, of the Euro. We shall see.
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