The EUR plunged against the USD on the announcement of European Union’s (EU) $1 Trillion rescue package. The deal has been sealed with 500 Billion Euro’s loan package from the EU and 250 billion Euro’s IMF. The deal managed to applaud the global markets as such, but did not lure the EUR currency which plunged from the day’s high of 1.3090 to low of 1.2672. Even though the Euro zone has rescued Greece from the debts problems, there has been the concern of new issues prop up from Euro zone countries like Portugal and Spain. There has been many unanswered question on the minds of smaller countries managing their deficit gaps. Also the macro data of German retail sales fell -2.4% from the last month’s increase of 1.1% was unfavorable for the EUR currency
On the other a hand, after the collapse story of Lehman Brother, the US recovery seems to be on track with the Institute of Supply Management index rose from 59.6 to 60.4 versus the forecast of 60. Also the pending home sales data has been supportive for the US Dollar which rose by 5.3% from the expected figure of 3.9%. The Non-Farm employment released last week for the month of grew fastest in four years where employers added 290,000 jobs from the expected number of 198,000. Also the ADP Non Farm Employment also added 32,000 jobs which is the most number of jobs since Jan 2008 which was in favor of USD.
From the technical perspective, the EUR is trading below the 23.6% of the upward movement from the 100% of the Fibo level which shows the EUR to be on a bearish mode. On the other hand the EUR is nearing the 30% level of the Relative Strength Index (RSI) which seems to be oversold and after crossing the 30% level of RSI, there can be a bounce back expected. The near term support can be placed at 1.2448 on the downside and on the upward trend, there can be a bounce back from 1.3090 which seems to be a strong resistance level. However, in days to come, the EUR looks to be more on the downtrend, unless European nations like Portugal and Spain do not give a comprehensible roadmap for their fiscal deficits they would be facing in coming months ahead.
Mohammed Rabbani
No comments:
Post a Comment