When you look at the Euro Dollar chart, it does make you wonder what is behind the move? Is the Euro going to fall apart? Is the Euro-parity finally on the cards again?

All those questions are valid, and as an investor or a trader, one should ask those questions, because the Euro-dollar has been in such a long trend since the start of this year.

At the beginning of this month, the EUR/USD was trading at 1.1084, and so far, it has dropped 2.35% approx. The last trading price was 1.0835.

Chart

Speculators have drawn too much blood out of this trade, and the currency pair has touched the lowest point since April 2017. Let’s dwell further on the reasons behind the current move, and see if it makes sense, after all, the move has been mammoth.

 

Here are the key reasons why the move has been so intense:

The European Central Bank’s new president, Christine Laggard, has defended the case for lower interest rates and, she has left the door wide open for more stimulus if there is any need for such. As long as the ECB is willing to push the interest rate curve lower, traders are ready to beat the EZ’s currency more against the dollar, because the Federal Reserve hasn’t shown any reason why they should cut the interest rates. Let’s just say that Trump’s prayers have not produced any fruit. This makes the Euro even more vulnerable for it is trading against a currency that is supported by a hawkish monetary policy stance.

If we start focusing on the Eurozone’s economic data, it has taken a turn for the worse. The economic engine of the Eurozone, Germany, isn’t providing any support. This has tumbled the Eurozone’s industrial production number.

Another important reason for the sell-off in the EUR/USD pair is that the dollar is also considered as a safe haven currency, and the on-going virus outbreak has increased its attraction. On the other hand, the lower interest rate on the Euro makes it more attractive as a funding currency. Hence, the selling pressure on the Euro is twofold.

In terms of the economic calendar, we have the German Prelim GDP q/q reading due at 07:00 GMT and, it is expected to stay at 0.1%. If we see the German GDP number showing any weakness — a highly likely scenario — because of the Coronavirus’s influence, it could push the Euro even lower against the dollar today. The dwindling German economy means the shrinking Eurozone’s economy. 

THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD bounces off the lows as the market mood improves

EUR/USD is bouncing toward 1.18, recovering from the fall triggered by upbeat US jobs figures and escalating Sino-American tensions. Investors are eyeing the fiscal stimulus impasse in Washington after Trump's executive order and the market mood has somewhat improved.

EUR/USD News

GBP/USD recovering toward 1.31 as the dollar weakens

GBP/USD has recovered toward 1.31 as the dollar pares early gains amid the impasse in Washington over new fiscal stimulus. A survey showing that a third of UK employers may lay off workers is weighing on the pound.

GBP/USD News

XAU/USD retreats to $2030 after making a run to $2050

Gold prices spiked to the upside after the beginning of the American session but then pulled back erasing gains. XAU/USD jumped to $2049.70/oz, and as of writing, it trades at $2033, practically at the same level it closed on Friday.

Gold News

It is time for King Bitcoin

The crypto board starts the week stuck on critical levels. The war for dominance has been favorable to Ethereum for weeks, and the graphics seem to indicate that it's now Bitcoin's turn to win a few battles.

Read more

WTI: $42.30 is the level to beat for the bulls

WTI (futures on Nymex) climbed nearly 1.50% in a bid to test the $42 mark on Monday, in the wake of the upbeat outlook painted by Saudi Aramco’s CEO Nasser and expectations that Iraq will cut output in August.

Oil News

Forex Majors

Cryptocurrencies

Signatures