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EUR/USD after extreme USD rallies
Fri, Sep 19 2008, 08:54 GMT
by John Hydeskov
Risks to EUR/USD remaining
- ·EUR/USD has fallen by more than 100%, annualised, during the past month.
- · Such moves are extremely rare; this is the first such dollar rally since 1992 and only the fourth since 1980. · Although the dollar may seem overbought by many yardsticks, the historical performance after extreme rallies suggests that further downside may be in store for EUR/USD in the coming months.
- · Rebasing past dollar rallies since 1980 to current spot levels, we find that on average EUR/USD has fallen to 1.32 after five months, before rising to 1.35 after one year.
- · If present performance repeats the patterns of the 1981 and 1984 dollar rallies, EUR/USD could fall below 1.30 before year-end.
- ·After 12 months the high-low range has been 1.19 -1.56 in today's terms, suggesting that directional volatility could become substantial in the months ahead.
Published on Fri, Sep 19 2008, 08:58 GMT
Archive
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