Currency Converter Eur Usd Live Chart – How to Profit From the Falling Dollar

Currency Converter Eur Usd Live Chart

The dollar has recently fallen to an all time low against the euro and one of the worst scenarios for the world economy for the last few years has involved a dollar crash. Is it time to prepare for that crash now? Currency Converter Eur Usd Live Chart

We must ask ourselves, what would cause a dollar crash? It would have to involve America’s dependence on foreign capital it’s most dangerous vulnerability. America’s dependence on foreign capital has lead to its large deficits. Do the US deficits threaten its and global financial stability? So long as the US remains the most attractive foreign investment destination in the world it can sustain such large deficits. However, if some event would occur, like say a crisis in the American financial markets that would spook foreign investors and cause them to ditch the dollar fast then the dollar will tumble.

The sub-prime mortgage woes was just such a crisis and to be honest the dollar held up pretty well. In fact this events showed clearly that if private investors become frightened central banks will pick up the slack. In order to abandon the dollar there would need to be an alternative choice for foreign investment and there simply put is not.

The stability of the US politically and socially, in spite of its enormous deficit, still leave the US the world’s most stable and reliable economy. Although Europe is stable politically, its slow growth make it an inadequate substitute for foreign investors. And even though China’s rapid growth is inviting, the threat of political instability deters any long-term bets on its economy which in itself is still very young and needs time to mature. Currency Converter Eur Usd Live Chart

My long term outlook is to buy the dollar and sell the euro.

In the long term nobody has anything to gain from the decline of the dollar and excessive volatility in exchange rates is damaging to the growth and economy of all regions of the world. Especially China who currently owns a substantial portion of the US debt. Also the euro’s rise is beginning to hurt the competitiveness of Europe’s exports and there is the possibility of central bank intervention to protect against the strong euro and weak dollar.

In the near future the dollar decline and further weakness most likely will continue. I am not about to stand in the way of such a strong trend as the dollar is near all time lows against the euro. But as everyone is talking about the weak dollar and my neighbors talk about hedging themselves against the weak dollar I know one of those rare opportunities is beginning to present itself just like it was obvious to me the bull market in US equities was coming to an end once my mother and her “investment club” began buying and selling stocks online or when a photographer at a wedding told me how he was going to begin flipping houses I also knew we had reached a top in real estate prices.

A worldwide “ditching of the dollar” would bear astronomical consequences. I do not believe anyone is ready to allow that to happen and I do believe there will be intervention to prevent it. Like I said though, I will not just jump in with this extremely strong trend in place so I will use my strength and talents as a technician to get into this trade.

In the member area in the Rules & Methods section you will find the methodology on how we will approach this trade. We will be trading the 4 hour, daily, and weekly time frames as this is a long term strategy. Since our positions will be short, the eur/usd will be collecting interest and pips the whole way. Currency Converter Eur Usd Live Chart

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Managed Forex Accounts Eur/usd Outlook 2008 1/3

The US dollar was the big story in 2007 — if you were selling it. Compared to 2001, the value of the dollar has gone down by 40 percent against the euro. And values at the beginning compared to the ending of 2007 were significantly down: the dollar was down about 13 percent versus the euro, 10 percent versus the yen, and 8.5 percent versus the pound sterling. Its value was at such a record low that supermodels and popular rappers made public their preference for getting paid in Euro, no dollars, please. The US dollar did stop skidding towards the end of 2007, but the question now becomes: has the dollar bottomed out or will the slide continue in 2008?

Why the Dollar Weakened in 2007

The dollar seemed so weak in 2007 because the rest of the global economy continued to grow even as US growth stalled, due in part to steady demand from the Middle East, China and India markets. Countries acted more independently, as illustrated by the Australian central bank’s decision to increase rates to stave off inflation at precisely the time the US Federal Reserve was cutting interest rates. Before December in fact, interest rate cuts happened only in the US. In short, some sort of decoupling occurred in the global economy, and this was a key factor to the strengthening of the other currencies and the weakening of the US dollar.

There are signs, as we begin 2008, that the phenomenon will no longer obtain this year and the global economy will again move more closely in step. In the latter half of 2007, economic growth in the UK and Canada slowed down indicating that the two countries were being weighed down by the weak US economy. In addition, the shock waves of the US subprime mortgage crisis have also shaken the financial markets of many countries, particularly the UK, where growth in the past years has depended on housing, mortgages, and the public sector. There are also signs of strain in the Eurozone, notwithstanding the ECB’s hawkish position on monetary policy. The pressure to reduce rates will increase if growth continues to weaken further in the US or in other countries. The pressure already forced the UK Bank of England to cut rates in December and more cuts are forecast for 2008.

Interest rate cuts will be the thing to watch in the currency market. The US Fed has already lowered interest rates 100bp in 2006 and another reduction will be more in line with expectations; but if the Eurozone begins to lower rates, this would be a significant departure from current policy, which could signal a major change in the outlook for the euro.

Where US Economy Is Going

The big question is whether or not the US economy is going into a recession, which would seriously impact global growth. Majority of the American public thinks the economy is already in recession, according to polls released in December. Public perceptions notwithstanding, economists think otherwise. A Business Week survey on 54 economists in December showed that the group believes the country will reflect a 2.1 percent growth by the end of 2008 (it registered 2.6 percent growth in 2007). They believe that although the first half of 2008 will be difficult, consumer spending will not stop, albeit more restrained. Fundamentally, the forecast of no recession rests on the assumption that the Federal Reserve will continue its round of rate cuts. Although financial losses in the subprime sector will continue, consumer confidence will depend largely on the Federal Reserves actions to support economic recovery.

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Looking at the EUR/USD Outlook for March 3, 2008

What the Eurozone Outlook May Be

The performance of the EUR/USD is heavily influenced by economic prospects in the Eurozone. Part of the reason the EUR/USD rose to its all-time high of 1.4968 was while the US Federal Reserve lowered rates by 100bp, the ECB raised its rates by 50bp. It was feared throughout 2007 that the strong euro would adversely impact the Eurozone economy. On the contrary, growth was buoyant, as Germany’s exports increased and boosted its trade surplus. Demand within the Eurozone was resilient and emerging markets spurred growth. Taking a cue from the lessons of 2004, when EUR/USD reached 1.36, Eurozone corporations were able to manage their foreign exchange risk much better in 2007 by increasing local production to minimise the effects of a weak US dollar.

Going forward into 2008, growth is finally starting to slow down. Business confidence in Germany slid to its lowest level in two years amid fears that higher interest, tightening credit, and rising inflation could adversely impact the economy. Both the European Commission and the ECB believe that 2008 growth will be less than initial estimates. The ECB has stopped making public statements about the Eurozone being immune to infection from the US business cycle; recent injections of liquidity into the financial system now prove otherwise. The last statistics on consumer spending and other indices for 2007 all showed lower numbers than the previous month. If the ECB does not lower interest rates in the following months, there could be a serious economic slowdown for the year.

What the Chances of an ECB Rate Hike Are

The year ended with the ECB President reminding financial markets that the ECB will be unrelenting in its program to control inflation and its effects, and they will not be pressured into following the US and UK interest rate cuts. Because of the ECB’s heavy focus on price stability, the market was alarmed when the bank’s 2 percent inflation target was breached in the second semester of 2007. But since the last ECB rate increase in June, they have not made good on their repeated threats to hike rates further. On the contrary, their actions seem to favour a more liberal monetary policy. When LIBOR (for 3-month Euro and 1-month sterling) rates hit record highs in December and did not come down, the ECB infused $500 billion in liquidity into the banking system. It helped to bring down LIBOR rates, but questions remain as to how long they will stay low.  Given these considerations, while a rate increase is possible, it is not really that probable. The prognosis is that rates may be cut first before they are raised again, subject to inflation pressure (such as oil at $100 a barrel). But if inflation remains steady or slows, the ECB is more likely to cut rates.

Summing Up

As in the past year, interest rates will be the main driver of movements in the currency markets. There is the chance of the US economy and the dollar recovering in the second semester, but that will depend on further interest rate cuts by the US Federal Reserve and the European Central Bank. A mere shift in ECB monetary pronouncements from hawkish to more neutral tones may be enough to stimulate US dollar recovery in the second half. There are signs of re-coupling in the global economy but it may take until the second/third quarter before this becomes more manifest. For the short term, traders might want to consider that January is usually a good month for the dollar.

The currency markets will really begin to shift (as everyone involved in it is hoping) when the dismal news stops and the cheerful news starts coming. Former US Federal Reserve Chairman Alan Greenspan said in an interview banks should not prolong the agony: it is better to take all their losses now and let the market bottom out so that the economy can start to recover.

Short-Term Technical Outlook: Top Up before Downturn

The expectation in the last quarter was there would be a rally to 1.4580 followed by a top and a subsequent reversal. Looking at the technical data, there may be good reason to look at 1.4309 as the most likely terminus on the wave iv (part of the 5-wave rally that began at 1.3261) of the larger sequence of 3 waves. The wave v of 3 may just burst through 1.4967 over the next four to six weeks. It is reasonable to target the 1.5364 level – the 61.8 percent follow-through extension from i to iii. There is enough data to support the bullish bias over the short term, as extremes in a bearish sentiment for Euro and a bullish sentiment for USD have been detected. It is possible this rally could continue through towards 1.6000 in keeping with the tendency of currencies to exhibit extensions on the 5th wave and to follow through with a blow-off top. The formation of the pattern is the key aspect in determining when a turn is about to occur (in a rally or a decline). It is important to follow the current pattern.

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