From the May 01, 2009 issue of Futures Magazine • Subscribe!

Euro trashed again

Depending on the day and who you talk to, the euro is either on the brink of becoming the world’s reserve currency or of extinction. Recently it had been trading down, and analysts don’t expect a rebound soon. Andrew Wilkinson, senior market analyst at Interactive Brokers, says Europe’s current monetary policy is part of the reason.

“The slowdown [in Europe] is spreading rather than getting better and the [European Central Bank is] relying solely on monetary policy to help dig them out of the ditch,” Wilkinson says. “They’ve held interest rates too high, they’ve had restrictive monetary policy for too long and it’s a matter of time before they have to head down the quantitative easing route.”

He expects the euro to test this year’s lows of 123.20.

Ken Lazzara, head dealer for Easy Forex US Ltd., says the correlation exhibited between the euro and the stock market for the first quarter is now gone. “The euro is up [and] the Dow [is] down. The correlation is out the window,” he says. “I don’t know what could come out of [the ECB’s next meeting] that’s any different than what we’ve seen.”

He says the technical trading range in the euro is between 131.50 on the low end to 135.50 on the high end.

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