The common European currency has been having hard times ever since it was introduced in 1999. According to various analysts, economists and other financial experts, the common currency is currently facing 2 major problems:
· Financial instability in Spain , Greece and Portugal along with no clear solutions for preventing such scenarios in the future.
· The very fact that the eurozone has no clear and efficient solution scares away investors and worsens the overall economic and financial situation in the area.
What are the prospects of the common currency? Let's ask Masterforex-V Academy.
S&P Cuts EU's Rating
One of the recent strikes on the stability of the common European currency took place when S&P, a major US agency, decided to cut the rating of the European Union by 1 step – from AAA to AA+. The forecast is stable.
The agency explained that the rating reflects the overall creditworthiness of all the 28 EU members. The rating cut indicates the overall decline in the economic situation seen in the EU. By the way, in the second half of the year, the same rating agency downgraded the sovereign ratings of France and the Netherlands.
Masterforex-V Academy's Opinion
Market Leader interviewed some of the experts working for Masterforex-V Academy shared their opinion on the matter and made their predictions concerning the near-term future of EURUSD.
Market Leader: How did EURUSD react to the existing monetary policies conducted by the ECB and the Federal Reserve?
The experts: The existing situation is that the Fed is about to start tapering the QE program while the record-low inflation seen in Europe makes the local authorities ease their monetary policies even further. Apparently, the situation directly influences the EURUSD exchange rate. In particular, it is restraining the rally shown by EURUSD recently. At the same time, no rally leading to a stronger common currency is beneficial for the export-oriented European economies. Still, the year of 2014 is expected to be more favorable for the EU economy, which can provide extra support to the common European currency. This makes us expect a slight retracement from the current price levels. However, this retracement won't probably grow into a full-fledged downtrend.
Market Leader: What can the new tech analysis tell us about the future of EURUSD?
The experts: As far as the DFWA analysis is concerned, the current retracement is going on within the scope of the last sub-wave inside a bigger scale retracement from the rally seen from late July 2012 till late January 2013. This move can really bring the market deeper. Still, there are some major support levels on the way down. The price is currently fluctuating around one of them and doesn't seem to be able to break below it. At this point, the bottom is around 1.35.
Market Leader: What will be the EURUSD exchange rate in the near future?
The experts: Let's consider the red bullish wave seen in the chart above (H4 chart):
The uptrend started on July 9th formed 2 major volume clusters – 1.3250 and 1.3520. The move started on October 25th can be considered the beginning of the bearish reversal. The supposition will be confirmed if the price breaks and consolidates below 1.3520 and further below 1.3296 (the end of the red bearish wave).
The upward move since November 7th (the blue lines) still fits a correction (recovery)against the red-line bearish move.
If the supposition is correct, the move started on December 11th is the 3rd red wave. The expected targets are 1.3090 - 1.2960. The scenario is also confirmed by the decline of EURUSD caused by the Fed's statement made on December 18th. Still, this is a small-scale move at this point.
The scenario implementing further blue waves cannot be completely excluded by now. By the way, the price has already shown a clear reaction to levels 1.3620 and 1.3710. The price consolidation relative to those levels will determine the near-term behavior of EURUSD.
As for price declines, a 2-3% decline is not a reason for global panic. The EURUSD exchange rate won't probably affect retail prices around the globe to much.
