The Single Currency had been sinking against the US dollar since the start of last week, but the rot really became a rout on Friday, with the release of Consumer Price Index (CPI) figures in the USA. These showed that, at long last, inflation is on the up. If this indication turns into a trend, then the last piece in the jigsaw that allows the US Federal Reserve to start moving on a schedule of raising core interest rates will have been put in place. As Mario Draghi and all his colleagues in the European Central Bank (ECB) have been at pains to let us all know that Quantitative Easing in the Eurozone will run its planned course, and even be accelerated in the near term, then all the elements for a complete divergence in monetary policy between the US and the Eurozone will be present.
And that means a fall in the value of the Euro against the US dollar (EURUSD).
Technically, too, last week was significant. The fall on Friday sliced neatly through the 200 period Exponential Moving Average (EMA) on the four-hour chart, which had been acting as support. And as can be seen in the chart below, a bearish weekly engulfing candle of a very pronounced nature has formed. This will be observed by market participants all over the globe, who will tend to take it as further evidence of the bearish nature of the Single Currency for the foreseeable future.
Holidays all over today
Today is Memorial Day in the US, a Federal holiday, and is also the Spring Bank Holiday in the UK. It is also Whit Monday, which is observed as a public holiday in many European countries. Forex traders all over will therefore not be at their desks. This will make for very thin and unpredictable trading. A good day for everybody to stand aside.