The Euro has easily broken below its 2009, 1.2330 lows
in early Asian trade, and into the 1.2200’s thus far ahead of the latest minor consolidation. Technically oversold studies have failed to influence price action, and all major currencies have been tracking considerably lower against the buck
on the day in sympathy to the Euro price action.
The general consensus is that the crisis in the private sector has now only shifted to a government debt crisis, with government bond purchases and fiscal spending reductions only seen exacerbating the situation. The UK Times has come out calling the Euro to parity, and this has also not helped to generate any bids for the beleaguered currency. ECB President Trichet adds that the markets are in the worst predicament since WWI, and has appealed for a “quantum leap” of fiscal governance.
While the Euro weakness has most likely been the catalyst for the major broad based currency sell-off, it is Sterling that has been hit the hardest on the day, now quickly approaching next key downside barriers at 1.4000, which guard against the critical multi-year lows by 1.3500. The UK Times outlines concerns over an export led economic recovery in the UK, and also reports that the new government has come out accusing the Labour of having manipulated forecasts to help the previous government present the budget that it wanted to. Also adding to the relative Sterling weakness has been a Rightmove index which shows sellers of properties starting to lower their prices on the back of an ever weakening housing market.
Other data released in Asia has come out of Japan, but the solid core machinery orders and higher wholesale inflation
have hardly factored into price action, with the Yen
tracking higher mostly due to a negative carry environment. Elsewhere, clashes in Thailand
and the news of more volcanic ash disruptions
out from Iceland, have not been doing anything to help the extremely downtrodden investor sentiment on Monday. The Euro is now testing levels not seen since 2006, with the next major support coming in by 1.2000
, below which exposes a drop into the 1.1600’s further down.
Looking ahead, the European economic calenda
r is exceptionally quiet, with the only material releases coming in the form of Eurozone new car registrations
at 6:00GMT, and UK CBI industrial trends
at 10:00GMT. US equity
futures are heavily weighed down in early Monday trade, while oil
prices also track lower on similar correlations. Gold
continues to retain a bid tone and trades by its record highs.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to discus this topic or any other feel free to visit our Forum page