Wednesday, 22 Dec 2010

After Minor Reversal, Euro Resumes Bearish Trend

News that China may buy up Portugal's debt caused the euro to stage a brief recovery against its main currency rivals earlier today. The EUR/USD pair reached as high as 1.3180 before dropping down to its current level of 1.3140. In addition, the EUR/CHF, which recently hit an all-time low, staged a very minor recovery in early morning trading, reaching as high as 1.2580. The pair has since fallen again, and is currently trading around the 1.2530 level.

Analysts warn that confidence in the euro-zone's ability to successfully manage its debt problems is still very low. Investors are likely to short the euro until the ECB comes up with a feasible plan to deal with the ever spreading crisis.

Turning to the rest of the day, traders will want to pay careful attention to the US Existing Home Sales figure, set to be released at 15:00 GMT. Early predictions are calling for a healthy increase in the figure over last month. If true, the news is likely to drive the euro down further as confidence in the US economic recovery continues to grow. Analysts are currently forecasting that the EUR/USD pair may drop once again, and could even dip below the 1.3100 level in evening trading.