EUR/USD Hits 14 Month Low, Further Declines Ahead

EUR/USD Hits 14 Month Low, Further Declines Ahead

By: Ben Myers | YesOption | On:09-09-2014 08:27
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EUR/USD Hits 14 Month Low, Further Declines Ahead

Trading in EUR/USD continues to remain subdued without much moment. However, Bulls had something to cheer for as EUR/USD gave a breakout above its 20-Day EMA on 15 minutes charts by trading above 1.28829.

The euro extended its losses against the dollar and touched the fresh 14 month low of 1.2859, the lowest level since July 2013. The US currency even extended its gains against Yen and touched the highest level in six years. The dollar is extending its gains as the market expects the US interest rates to rise much sooner than the initial forecasts. 

ECB cut rates to new lows last week, the impact of which is still seen in the markets. The benchmark interest rate witnessed a cut and touched the new low of 0.05% from 0.15%. The new measures to boost inflation and lift the faltering recovery brought back the pressure on EUR/USD pair. It was clearly visible as the investors didn’t pay any importance to the soft U.S. jobs data released on Friday. ECB steps to loosen policy paved way for a big decline in the euro as it gave away all its gains of Friday and started the week on a weak note.

Apart from rate cut, ECB also lowered deposit facility rate to -0.20% from -0.10%. The marginal lending rate was slashed to 0.30% from 0.40%. Going further, the European monetary authority has plans to initiate a new asset-backed securities purchase program to lift the faltering economy. The ECB cut the growth forecast for the current year to 0.9% from 1.0%. The growth forecast for 2015 is revised down to 1.6% from 1.7%.

ECB is following an opposite approach as compared to its counterparts from the US and the UK. At a time when the UK and the US monetary authorities are keen to tighten their policies, ECB wants to loosen its monetary policy. Also, Japanese central bank is expected to follow looser monetary policy in months ahead.

Actionable Insight:

Buy EUR/USD above 1.28940 for a target of 1.29010 with a stop loss of 1.28930.

Ben Myers

Ben Myers

Success = few pips, thousand times

Ben Myers is one of the most respected and trusted names in the financial trading industry. Following a long and successful career with HSBC, Bank of Ireland and running his own investment firm

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