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Euro Dives as Fitch Warns of "Cataclysmic" Collapse

Last updated 1/11/2012 6:52 AM ET (GMT -5) 1 Comments

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Boris Schlossberg

Director of Currency Research, GFT

@import url(/css/cuteeditor.css); The EUR/USD took a quick tumble  dropping below the 1.2700 level after Fitch rating warned that ECB must do more to prevent “cataclysmic” euro collapse. The pair dropped by more than 50 points in the wake of the warning as the ratings agency refocused market’s attention on the ongoing sovereign debt crisis in the region.

The warning by Fitch comes only one day ahead of the ECB monthly policy meeting and puts fresh pressure in the monetary policymakers to maintain their accomodative stance. Ahead of the  meeting consensus view was that ECB would not lower rates or engage in further non-standard measures. Writing yesterday Goldman Sachs noted that  “the ECB will likely want to have more clarity on how the macro picture is evolving and how successful the measures taken in December have been in stabilising the situation.”

However the fresh warning Fitch suggests that Mr. Draghi and company cannot remain complacent and if they do - offering no additional policy initiatives at tomorrows meeting, the euro may come under further selling pressure with shorts targeting recent swing lows near the 1.2650 level.  The pair remains heavy going into the North American trade and may test those lows as the day proceeds.

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Comments (1)

tomek

January 11, 2012 at 08:01 AM ET

Hello Boris
do you think about the level of 1.2820

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.