Uncertainty about European political and economical situation and the deceleration of the US economy make forex markets to register high volatility.
In the US, after the last FOMC meeting (on July the 11th), blew out expectations held by market participants of a new quantitative easing (QE3) in the short term, favouring equity markets to fall down but pushing USD against EUR to reach new annual highs. Next support zone of the European currency is around 1,18 USD/ EUR, when is expected that euro weakness could drive the world economy to “alert zone”. An expensive USD potencially affects in a negative way the US trade balance, because exports are fundamental for the US economy in an environment of weak growth. In view of presidential elections next November, president Obama cannot afford a situation of economic lethargy especially when US economy still has problems to create new jobs, keeping its unemployment rate above 8% during his term of office (far away from the historical natural unemployment rate of 4,5%).
By the moment nor the BCE neither the rest of the Central Banks are coordinating new actions in order to avoid a potential plunge of the euro, though the situation in Europe is, with mild words, delicate, because of the incapacity to solve the European periphery debt problem and because of economic deceleration (more profound in the Eurozone than in any other part of the world). Lowering the official interest rates (to 0,75%, the minimum ECB ́s history decided two weeks ago), reinforces the weakness of the European currency.
Analyzing the situation of the euro against the japanese yen we also observe an extreme position in historical terms near the long term support of 88,90 JPY/EUR, but there is still a near term support around 95,50 JPY/ EUR. Source: Bloomberg The situation in the country after the dramatic tsunami that affected the country during the winter of the past year, its economy is showing an odd dynamism, with expected rate of growth above 2% in 2012. Inland reconstruction and the unstoppable Chinese demand, allows exports, in spite of the yen ́s strength, to contribute in positive terms to its growth in recent quarters.