Tuesday, November 10, 2015

Single Currency approaches an historic level | The new safe-haven needs turmoil to support it

Since the onset of the Global Financial Crisis, which took hold in earnest in 2008, the Euro has never been so low against its main Foreign Exchange counterpart, the US dollar, than it has been this year. Earlier in the year it enjoyed something of a reprieve on its way past the 1.10 mark, and this lasted for most of 2015. Indeed, in the middle of the year it almost looked as if it was reaching out for 1.20, only to be sent sharply below 1.10, moving down with a vengeance after the last FOMC statement, and accelerated by the news that Non-Farm Payrolls reached a record for the year last Friday.

Now the chatter is, once again, around the prospects of it hitting parity with the Greenback, which some commentators predict will happen early next year, perhaps after the US Federal Reserve starts to lift interest rates.

The new safe-haven needs turmoil to support it

Whatever strength the Euro had this year was as a direct result of the fact that it has now assumed the status of a global safe-haven currency, to be fled to in times of crisis, as was formally the case with the dollar. Ironically for most of 2015, the overarching concern of hedge funds and all those who are concerned about their currency holdings, and who seek safety, was the situation in Greece. Ironic, because Greece is a member of both the European Union and of the Euro zone, which is the jurisdiction of the Euro itself.

Now Greece has been sorted, or at least so it appears. Possible issues that can just about be discerned on the economic radar screens include China (rumbling away amid concerns about the accuracy of economic data coming therefrom), and the undertaking by the British Prime Minister, David Cameron, that his government will hold a referendum on EU membership.

Needless to say, there could be other issues that, when they come, will be perceived as having appeared out of a clear blue sky. All this keeps things interesting, of course, but as far as the OmiCronFX Mandelbrot system is concerned, it also maintains the volatility in currency pairs that allows it to return Forex trading profits.

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