EUR/USD — Euro currency price action has been hostage to the sovereign debt crisis. However, the really important factor for EUR/USD valuations is expected growth in the Eurozone, and expectations for growth are grim. The Eurozone Composite PMI (Purchasing Managers Index) had the worst reading since June 2009 — an indication the Eurozone could be entering a great contraction. Whether this occurs or not, it is likely that Eurozone growth will lag behind that of the United States and Asia in 2013. As a result, the EUR/USD may very well be probing 1.20 and even 1.15 in 2013 (see “Euro-trashed”).
Of course, the outcome of the fiscal cliff negotiations may create other opportunities. The U.S. dollar and gold will face a great deal of volatility depending on if the can is kicked down the road, we fall off the cliff or we reach a compromise between those extremes. In any case, 2013 will offer major trading opportunities.
Abe Cofnas is author of “Sentiment Indicators” and “Trading Binary Options: Strategies and Tactics” (Bloomberg Press). He is the editor of the “Binary Dimentions” newsletter and can be reached at email@example.com.