By: EliteGlobal
Currencies
Best Financial Markets Analysis ArticleEUR vs. USD formed a rectangular pattern during July 2008 to till date and awaiting for the upside breakout at 1.44 levels. Once it breaks the 1.44 levels, US dollar will depreciate to 1.64 against euro. Due to global economic recovery, investor seeking commodities and equities rather than invest in US dollar.
Forex Outlook
* Forex markets are in consolidation phase which will provide the direction for the future. Global financial market and currency market also in consolidation phase along with the currency market
* Recent global economic activity shows the signs of stabilization which is contracted sharply in the first quarter of 2009 but the economic recovery will be slow and gradual. Continuous increase in the unemployment and rise in commodity prices are the major concern to the economic recovery.
* Global GDP growth is on pace to register a year of negative growth in 2009 for the first time in decades. Even though Global economic growth will turn to positive in next year, inflation will be the main concern for policy makers.
* Consumer confidence and business confidence across the various countries are increased in Q2 2009 compare to Q1 2009 implies the worst of the recession has passed. During the year 2010, Central banks would increase its interest rate to combat inflation.
EUR vs. USD has strong resistance at 1.42-1.44 levels and its struggling to break that level. Also it has strong resistance level at 1.36-1.38. So for next few months it will trade between 1.36-1.44 levels and after that we can expect depreciation of US dollar.
* During 2nd July, European Central bank left its benchmark interest rate unchanged at 1.0% on its policy meeting and we expects that the ECB to maintain its interest rate for next two Quarters to ensure the liquidity for economic growth.
* Even though flat trend in business investment and consumer spending, increase in the business confidence and consumer confidence implies the economic bottom out. But the continuous rise in the unemployment will slows the recovery.
* European Central Bank may print more money to buy Europe banks debt and buying euro-denominated covered bonds directly from primary and secondary markets over the next year in order to maintain the money supply.
* German investor confidence unexpectedly fell in July, indicates the recovery in Europe’s largest economy may take longer time than previously expected.
* Based on our forecast, US and Euro interest rate will be at 2.2 and 3.6 percent during end of the year 2010 due to drastic increase in monetary base by Fed Reserve will leads to inflation in end of the year 2009. The US fiscal deficit is estimated to reach 14% of GDP by end of the year.
* Overall, US economy is in better position in economic recovery than its European or Japanese counterparts. US economy will reach positive GDP in Q3 2009 but the recovery on European economy will be slow. But due to Global economic recovery, investors seeking high yield assets rather than US dollar. So US dollar is in long-term depreciating trend against Euro in 2009 and 2010.
By EliteGlobal Market Research
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