Friday, 27 March 2009

Euro breaks below trendline support

According to a report from Bloomberg one major prop that has given the euro a boost recently has been removed. The downside now looks like a fairly safe bet - perhaps all the way back to the $1.25 level soon.

Citigroup Inc. said it ended a bet that the euro will strengthen against the dollar as pressure mounted on the European Central Bank to follow the Federal Reserve in buying bonds to lower interest rates, a policy known as quantitative easing.

“We are taking off our long euro-dollar trade on the lack of follow-through from the introduction of quantitative easing in the U.S. and the pressure on the ECB to move in the same direction,” analysts led by Jim McCormick, Citigroup’s London- based global head of foreign-exchange and local-markets strategy, wrote in a report today. “We believe that dollar weakness will remain a dominant theme but see better opportunities in other places.”

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