EUR/USD has been on the offer at the start of the week at the mercy of commodity markets and the greenback taking the lead to start us off for the days ahead that are sure to be busy. First off, the gold price has dropped like a stone, amongst further sell offs in oil and its derivatives that are continuing to drive the US dollar higher.
The gold price (Spot: $1,250.20 and $1,142.60 the lows currently) took a further bout of supply on the back the Swiss referendum vote where the SNB were voted against increasing their gold reserves. Oil and related products are a continuation of OPEC maintaining their current quota of supply and as full markets return this week, margin calls may well be the catalysts for a further squeeze of long positions. Already we are seeing crude ($68.15 the low), the worlds benchmark price and WTI ($65.78 the low) to the lowest levels since May 2010 and July 2009 respectively and this too is supporting the greenback.
For the single currency this week, it should remain on a rocky road and it has its own economic fundamentals at home to contend with, the ECB being this week’s domestic highlight. While economists do not expect any direct action until the start of 2015, the macro-economic projections will be published and these are unlikely to be particularly supportive of the single currency and may highlight both concerns around the ECB’s inflation targets and declines in growth. Eurozone GDP is likely to be the first set of data pre ECB that could rock the boat and a break out of recent ranges below 1.2400 would extend the downside while 1.2517 marks key resistance at R2.
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