Rate cuts halt EUR/USD fall [ October 8th, 2008 ] Posted in » Forex News

Over the past few days, the euro has finally broken out of its weeks-long slump against the dollar. Federal Reserve Chairman Ben Bernanke announced on Tuesday that the Fed would be taking the unprecedented act of buying three-month commercial paper, and today, central banks around the world made coordinated reductions in the target lending rate. Anticipating an easing of the credit squeeze that has driven the dollar’s recent rise against the euro, traders sold USD and bought EUR in today’s online trading. As of 4PM EST, the euro had made its biggest gain against the dollar in more than two weeks, moving from 1.3585 yesterday to 1.3658.

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For the euro, August is the cruelest month

It’s been a volatile year for those who engage in online trading of the EUR/USD. In 2007, the dollar fell off as much as 13% against the euro. Until this month, it looked like 2008 would also be a banner year for the Eurozone’s currency. The euro surged above $1.60 in both April and July forex trading, hitting an all-time high of $1.6038 on July 15th. But based on the vicious beating that the euro has taken in August, T.S. Eliot’s assertion that “April is the cruelest month” might need to be reconsidered. On August 8th, the euro dropped below $1.50 for the first time since February and below its 200-day moving average for the first time since 2006. As of this writing, EUR/USD is hovering around $1.4673.

Many forex analysts anticipate that the remainder of 2008 will see the euro continue to decline against the dollar. On August 7th, in a statement that at least indirectly led to the next day’s online forex trading debacle, ECB president Jean-Claude Trichet opined that the third quarter would be “particularly weak” for Eurozone GDP growth. As the recession that grips the U.S. spreads beyond its borders, the dollar is likely to strengthen, further challenging the dominant EUR/USD trend of the past years.

More EUR/USD-related forex news to follow…

August 27th, 2008 | Comments Off

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