Ukraine Crisis Pushes Euro Near to 14-month Low

Ukraine Crisis Pushes Euro Near to 14-month Low

By: Ben Myers | YesOption | On:08-09-2014 08:04
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Ukraine Crisis Pushes Euro Near to 14-month Low

It’s the kind of a day when EUR/USD has finally moved into positive territory on hourly charts. However, it is finding difficult to sustain at higher levels. Overall EUR/USD continues to remain weak and break of weekly low of 1.2920 would take currency pair all the way down to 1.2905 and 1.2890.

The data from the International Monetary Market for the positioning of EUR has pushed the currency’s non-commercial positioning to the 4th percentile. It was evident from the most recent IMM data, which was released last Friday that the currency’s bearish trend continues for the third week in a row. The falling trend in EUR/USD is expected to continue despite efforts from European Central Bank to save the currency. This corresponds to the EUR’s increased sensitivity compared to other currencies.

This development follows the European Central Bank’s move to protect the Eurozone’s economy from falling inflation rates. Most of Europe had been unsettled by low inflation rates, which was at 0.3% in August, a five year low in annual terms. On Thursday, Mario Draghi, President of the European Central Bank unexpectedly cut the deposit and repo rates. This resulted in the EUR reaching a fourteen month low against the USD by falling by 1.6 % to $1.29. Draghi is known for his turnaround speeches such as the one he delivered two years ago, when the EUR plummeted towards a seemingly bottomless pit in light of a financial crisis, promising that the European Central Bank will do “whatever it takes” to save currency.

The European Central Bank’s policy decision to save falling EUR was quite docile when compared to the efforts from its counterparts at the United States and United Kingdom. They had earlier resorted to more dramatic measures such as large-scale purchase of mortgage based securities and government bonds respectively. These drastic exertions did provide results even as the Eurozone struggled to match the growth of their economies. Draghi, however, noted that this was as low as the rates were going to get lower as any more measures from the bank to this end would mean buying assets such as government bonds.

Actionable Insight:

Sell EUR/USD below 1.2940 for target of 1.2925 and 1.2910 with stop-loss of 1.2948

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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