Could the Euro be a long term play?

FX Strategy Articles > Fundamental articles

Things have gone real bad in Europe for a very long time. The issues in Greece and Italy are a legacy of bad financial policy over a number of years. But change is in the air. When Berlusconi announced last year he was going to step aside after austerity measures were finalised, the world only half believed him. Today it seems not even Berlusconi can make a comeback. Similarly, Greece has a new prime minister this week as well with Lucas Papademos being sworn in after a couple of weeks of turmoil.  Papademos has a background in economic policy, something that has sorely been missing in Greece.

The changes in Italy and Greece are symptomatic of a region where the people have finally said enough is enough. The changes at the top are most visible in these countries, but other countries are reigning in economic policy as well. The EURO has been battered from pillar to post since the first global financial crisis. All this talk of change has everyone at FX Strategy speculating whether or not the EURO might be a good long term play.

In a video last week Chris looked at the EUR/CHF currency pair and speculated that the 1.24 level is very important. If we break through that level the currency would have broken through significant resistance. Keep in mind that the Swiss National Bank also have been known to intervene at the 1.2 level, so the pair is unlikely to fall below that. Monday’s trading session will be interesting to see if the positive news can bring the pair above the 1.24 level. It’s possible the EURO could be a long term play for weeks months or even years should sentiment continue to turn around.

The EUR/USD has a lot of baggage attached to it. The currency pair has been like a race to the bottom with both economies going through tumultuous times. Movement to one currency over another in this pair will come on the back of good news from one region. We will also be closely monitoring this pair in the near future.

Published on 13th of November 2011
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