Forex Analysis: Can The Euro Rebound? Forecasting the future of EUR/USD

ForexNewsNow | Published on September 10, 2010 at 1:40 pm

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realtime forex euroNEW YORK (Forex News Now) – After enduring a tumultuous year, one featuring a 12% drop in value against the U.S. dollar and gloom and doom stories about financial crisis in the eurozone, the euro is trying desperately to recover on faint hopes of future growth.  But, with the global recovery still far from a sure thing, can the euro sustain short-term growth in the next six months to make it an attractive option for investors in global forex trading?

The answer to that question varies, depending on whom one asks, but the preponderance of evidence points to the prospect of minimal growth over the next six months for the euro against the dollar.

Current State of the EUR/USD Pair
The first step to determining whether or not the euro is a solid bet (or worthwhile gamble) in currency market trading is to take a look at where the euro stands now in the right perspective.

Historically, the euro is trading roughly in the middle of the range established in 1999, when the euro was introduced at virtual parity with the dollar.  The euro has been trading between $1.20 and $1.50 for the past four years, so its current mark of $1.2714 is not that dramatic.

Looking at the history of the pair and the current state (the euro is up 0.16% on the day and 6.7% from the 52-week low of $1.19 reached in June of this year) suggests that, contrary to alarmist predictions, the euro is actually holding steady from a long-term standpoint, making it attractive for short-term, realtime forex traders.

Are there any indications, though, that the euro is doing more than stalling in global forex trading? Are there signs that the euro will either fall below the dreaded $1.20 barrier for the second time in nine months or pull up against a still-sluggish dollar?

Short-Term Prospects
As any euro trader knows, the fate of the EUR/USD pair is tied to the eurozone and the underlying fundamental strength of the zone’s economy.

The crisis involving PIIGS is far from resolved but appears to have calmed a bit (although this is more than likely due to media inattention owing to a lack of high-profile riots and not any systemic improvement).  While part of the rebound over the past three months from the 52-week low stemmed from actions taken by the European Central Bank this summer, the rest can be tied to a somewhat-hopeful attitude adopted (perhaps naively) by movers and shakers in the currency market trading community.

However, the state of the eurozone is far from certain, and trouble still looms on the horizon.  Lorenzo Bini Smaghi, a member of the ECB Executive Board, stated today that a serious debt crunch is still lingering in several key countries in the eurozone, sparking fresh worries that the crisis- though to have abated in recent months – is still lurking beneath the surface.

For realtime forex traders interested in making a move in EUR/USD, a wait-and-see posture is suggested in the next six months.  The euro may be in a historically-stable range at the moment, but the currency is one dramatic announcement from a European member bank from falling dramatically like it did earlier this summer.

Barring some unforeseen and startling recovery, the euro is projected to advance minimally at best against the dollar.



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