A bearish engulfing pattern appeared in the final weekly chart of
October, indicating weak euro prices. Analysts suggest the euro is
staging a perfect storm. I do agree the euro is facing a crisis of slump
as several factors have been negative enough to push the currency into a
new bear market.To get more news about WikiFX, you can visit wikifx official website.
In terms of external factors, the uncertainties in the election and
the failure of the White House and the House of Representatives in
reaching a relief deal have brought about negative impacts, which
weighed on US stocks and sent a sharp rally to the DXY. As a result, the
euro bore the brunt of the strong greenback.
In terms of internal factors, the fatal hit to the euro first
attributes to the second wave of the pandemic across Europe, which urges
countries such as Germany and France to impose emergency lockdowns,
resulting in sharp economic losses. The economic data is estimated to be
even worse in the future. Besides, although the European Central Bank
(ECB) kept interest rates unchanged last week, all members of the ECB
had agreed that it was necessary to take action at the next rate, said
President Lagarde. In the wake of such a statement, the euro prices
plunged to a four-week low.
The next ECB meeting is scheduled for
December 10. In this regard, I believe the ECB will not only take action
at the next meeting but even undertake more quantitative-easing
measures. The ECB may take early action in response to either the bloc‘s
pandemic or the economic situation, which put continued selling
pressure on the euro. If this week’s US stocks fall steeply because of
the turmoil in the country, the euro will be further punished.
Economy:
Notably, the latest US GDP released last week
embraced the strongest rally in history, proving there is a big
difference in the economic situation between the US and Europe. The Fed
meeting is about to be held this Thursday in addition to the
presidential election this week. There seems to be no need nor space for
the Fed to take dovish measures amid the strong economic growth. With
the election and the Fed's meeting on the way, the DXY has a great
chance to climb further this week, a heavier pressure on the euro. Thus
the euro is poised for a perfect storm no matter in the short, medium or
long term.
