Euro Sees Outflows
Today’s Spotlight Market
The Euro has been in a steady decline versus the greenback since May.? Prices now find themselves at the lowest levels since November of last year, as investors have been leaving Euro-based assets.? The ongoing conflict between Ukraine and Russia has shaken some investor confidence.? The sanction game that Europe and the US are playing with Russia has the potential to have more of a negative impact on European nations.? In addition to EU concerns, the Euro has suffered due to a renewed appetite for Dollars
Fundamentals
Capital inflows into European government debt instruments fell to roughly $7.5 billion in the second quarter from around $14 the quarter prior.? Investors have good reason to be shunning European assets. The ECB has been struggling to keep inflation from falling too low, which may result in more stimulus efforts.? Euro area inflation fell to 0.4 % in July, versus 0.5 % in June.? The 0.4% inflation mark is the lowest reading since the world economy began recovering from the banking meltdown in 2009.?
The inflation conversation in the US has had a very different tone, with the Fed hinting toward tightening to keep inflation in check.? The Fed has recently cut its asset purchases to $25 billion a month, staying on track for the central bank?s October target to end the program. Currency traders are also down on the Euro in light of economic progress in the US.? Traders are looking for tomorrow?s non-farm payroll data to show the US private sector added 231,000 jobs in July, and for unemployment to stay at 6.1%.? ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the September Euro FX contract pushing closer to the relative low from November near 1.3350.? If prices are unable to stay north of this level, the Euro could test additional support near the 1.3150 mark. However, the key downside support traders may wish to focus on is 1.2750.? A downside breakout below these levels could be seen as a long-term directional shift.? The result of recent selling has resulted in the RSI indicator falling into single-digit territory, which can be seen as extremely oversold.? This may be supportive of prices in the near-term.
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