In the past 4 months we have seen a massive drop in the EUR/USD, and the question is- when will it finally bottom out?
Not yet.
Just four short months ago, the euro was trading high and actually briefly flirted with 1.39, but the enthusiasm for the European currency quickly evaporated as the outlook for the region started looking grimmer and made American assets look more attractive for Investors worldwide.
CPI nimbers have been declining steadily for the entire year, making the threat of deflation an imminent possibility.
I think its a little early to talk about an outright recession but the pressure is on the ECB, to take swift action and use their entire arsenal to lift up the entire Euro Zone, and that means injecting more money into the markets, which should cause a further decline of the euro.
I see the EUR/USD bottoming at $1.30, especially if we continue to see positive momentum from the US economy- GDP numbers coming out this Thursday could prove to be a catalyst for another big drop.
The momentum is all about the dollar right now, and it will be really tough to bet against the greenback. Unless there is a surprising decline in US data, I do expect to see $1.30 in the near future.