Current trend
Thursday became another hot day for investors and the European currency. Most investors did not doubt that the Euro would continue to weaken against a backdrop of decreasing economy growth rates and political tension within the eurozone. But nobody expected that the Swiss National bank would decide to abandon the franc peg against the euro. Due to the sharp weakening of the Euro, the SNB was forced to weaken the franc artificially in order to back up a minimum level of 1.20, and the Central regulator had to choose the lesser of two evils: to drown with the euro or to "unpeg" the franc to the detriment of national export.
Thus, the European currency broke all possible lows and reached a level of 1.1570. Today's information on the eurozone's key indexes and more exact data on December's inflation will probably influence the dynamics of the pair. It's worth noting that the euro will remain under pressure until the ECB''s key meeting. If Mario Draghi does not succeed in reversing the situation and gaining back the confidence in the euro, a further downward movement will be irreversible. Some experts think that the ECB could start full-scale quantitative easing on 22d January to stimulate the economy. But in this case, the European currency will be under even bigger pressure and the pair may reach a level of 1.1400/1.1350.
Support and resistance
Support levels: 1.1625, 1.1600, 1.1570, 1.1550, 1.1500, 1.1400, 1.1375, 1.1350.
Resistance levels: 1.1650, 1.1675, 1.1700, 1.1730, 1.1760, 1.1800, 1.1850.
Trading tips
The situation suggests building up short positions and opening pending short positions from key resistance levels with profit fixing at 1.1400, or at 1.1300- 1.1250 (in the medium term).
Dmitry Likhachev
Analyst of LiteForex Investments Limited
