Wednesday, March 14, 2012

EURUSD Trends Lower

After trading to 1.3500 twice in February, the EURUSD has been in a downtrend.  The move culminated with a drop to a low of 1.3020 yesterday after the pair broke below its earlier support level of 1.3080.  However, the EURUSD has recently bounced off its morning lows to trade back around 1.3080, even as the dollar has been gaining overall..  Looking ahead, the question is whether the current gains mark a turnaround in the EURUSD and proof that Forex traders are willing to support the Euro, or will we see sub 1.3000 trading soon.

FX Street takes a look at the current state of the EURUSD in its Mid-Week EURUSD analysis
A strengthening U.S. economy and talk of possible interest rate tightening sooner than expected by the U.S. Federal Reserve is helping to pressure the EUR USD this week.
At the end of last week, the U.S. government reported a better-than-expected Non-Farm Payrolls report. This led some traders to assume that the Fed would take a “wait-and-see” approach before applying another round of quantitative. Additionally, some speculators were betting that the Fed would change the language of its monetary policy statement to reflect an improving economic outlook.
Although the European Central Bank is holding its benchmark interest rate at 1.00 percent, the uncertainty over sovereign debt and the possibility that the Fed would refrain from implementing additional financial aid programs caused some traders to pare their long EUR USD positions. This action has been pressuring the Euro all week while supporting the greenback.
On Tuesday, the Federal Open Market Committee met to discuss monetary policy. After the meeting it was revealed that the Fed acknowledged signs of a strengthening economy. This brighter U.S. economic outlook is helping the dollar as it is encouraging investors to downplay expectations of future stimulus measures.  Read More

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