Lower Euro Values Expected

Lower Euro Values Expected
September 22, 2014

The US Dollar ended the week on a higher note against virtually any other currency. This was predictable given the G20 meeting held over the weekend, and the role the US dollar plays as a world reserve currency. It is still perceived as a safer currency therefore traders favor it ahead of risky events.

Last week saw the major currencies floating within a larger band than usual. This volatility was due largely to the two key events of the week, the FOMC statement and the Scottish referendum.

What can we expect in next few weeks?

Well, even though next week is not packed with important economic data, we do have two events that have the potential to influence the Euro for the rest of the week.

The ECB’s president, Mario Draghi, will speak in front of the European Parliament’s Economic and Monetary Committee. He will discuss the ECB’s monetary policy and plans for the near future. Given the recent ECB actions, expect a bearish tone from Mr. Draghi. This should translate in even lower values for the Euro across the board.

This week, the all-important Euro zone PMI (Purchasing Manager Index) figures are released. These numbers are extremely important because they will allow traders to make a clear distinction between an economy that is expanding and one that is contracting. It will offer insight between a sector that is in recession and one that is in expansion, and what the implications are for the respective currency.

As traders you know that when it comes to PMI figures, it is vital to reach a index level of 50. Higher levels mean expansion for that respective sector, so bullish for the currency, and lower levels mean contraction, with bearish implications for the currency.

Taking into the account the two major events from the past week, it is likely that the EURUSD will continue its decent in the week to come. Values above 1.30 seem harder to reach, and the path of least resistance indicates 1.2500 sooner rather than later.

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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