eurusd hits 11 year lows 87562015
<p>EUR/USD tumbled by another 200 pips to hit an 11-year low at $1.1460 as the US dollar broadened gains on traders’ increased realisation that yesterday’s […]</p>
Share this:
EUR/USD tumbled by another 200 pips to hit an 11-year low at $1.1460 as the US dollar broadened gains on traders’ increased realisation that yesterday’s Swiss National Bank decision to end the EUR/CHF peg was an implicit vote of confidence for the US currency. As the SNB halts purchases of German bunds and other Eurozone assets, it will partly shift towards buying US bonds and other high quality US assets.
Size specification
Reasoning that the SNB decision is aimed at aimed front-running a large QE program from the ECB next week is based on the argument that ECB balance sheet expansion would be a euro-negative. The ECB would not only have to announce the start of outright monetary transactions, but specify an preliminary amount of at least €750-€800bn in order to garner any credibility in its war against deflation.
The need to specify the amount of planned purchases is crucial since ECB president Draghi has already mentioned he planned to lift the balance sheet back to the days of 2012, when it was at €3 trillion, compared to the current €2.2 trillion. Managing bond traders’ expectations will be paramount in getting anywhere to raise inflation expectations.
What if they disappoint?
ECB president Draghi cannot afford to disappoint next week. A disappointment is considered as remaining vague on details of the QE and/or announcing modest amounts, such as less than €500bn, while the most extreme type of disappointment would be to not even announce any plan of asset purchases, which is highly unlikely.
Any disappointment along the lines of modest amounts could trigger a short-lived euro rally, which would later be followed by fresh selling on the realisation that the single currency has little to run on besides deteriorating deflation and negative interest rates.
The mother of all moving averages
Having breached the 200-month moving average for the first time since late 2003, EUR/USD faces its next destination towards the November 2003 low of 1.1380. Over the two last major down-cycles in EUR/USD, the pair fell 26% from its 2008 highs to 2010 lows, down 19% from the 2011 highs to 2012 lows and now is 18% from the 2014 lows. For these cyclical declines to be in line, EUR/USD could extend losses to as low as $1.1150.
Related tags:
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.