Euro Deterioration to Continue says RBS Analysts

(eToro Blog) Heightened fears and uncertainty are playing havoc with the common currency Euro, which recently touched on a 2-year low against the greenback, as well as multi-year lows against both the Yen and the Aussie. According to a currency strategist from the Royal Bank of Scotland, the common currency will continue to decline in the mid-term, but as is already being seen, investors will divvy their attention between the need for a safe haven, i.e., the U.S. Dollar and the Japanese Yen, and the desire for a higher return on investment which will push them to the commodity-linked currencies like the Australian and New Zealand Dollars.

According to the RBS analysis, investors’ demand will rise for the “other” European currencies, i.e., the Danish and Swedish Krone but not the Swiss Franc. The Swiss Franc, because it is pegged with the Euro, has been under similar pressure and recently struck a 19-month low against the U.S. Dollar. There is growing concern that the Euro’s deterioration could make it near impossible for the Swiss National Bank to continue to defend the interest rate cap.

The EUR/USD pair is currently trading at 1.2105, recovering from the day’s low of 1.2086; sentiment on OpenBook is being driven by bargain-hunting bulls. The USD/CHF is edging closer and closer to parity at 0.9921, falling back from the day’s high of 0.9937; sentiment on OpenBook is overwhelmingly bearish, with 95% of traders selling.

OpenBook guru pawelskrzypek, who had high hopes after last month’s E.U. summit, has reevaluated the situation and reverted to a decidedly bearish bias but not before he took some hits to his good record. For the last month, the guru posted a loss of 7%, but is on his way back to profitability with a 6% profit for the last week. The guru has placed several orders to sell, and he and his many copiers are only waiting for the orders to be executed.

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