EUR V/S USD – A Battle of Royal Currencies?

grphicUS Dollar and Euro, the most traded currency pair in the world, seems to be in battle to retain their value from past one year. The constant positive and negative economic movements in these two giant economies have made the battle interesting. Due to this, once again the debate is on for these currencies to prove their superiority. The United States of America has faced the challenges related to tapering; similarly, Europe has been under constant pressure to get positives out of its economic contributors to sustain above bankruptcy level.

Important Levels; (USD per EUR)

  • 16 th December 2012                   – 1.3159
  • 52 Week High                             – 1.2763
  • 52 Week Low                              – 1.3816
  • 15 th December 2013                   – 1.3739

In the past one year, the exchange rate movement between these two currencies has kept the currency market on toes. The dollar has been successful to close above USD 1.3159/EUR for 134 times whereas EUR has outperformed USD on 222 occasions. The dollar has hit 52 week high with the premium of approximate 3 % whereas the discount was approximately 5 % for hitting 52 week low from the close price of 16th December 2012. In simpler words, the United States has shown better economic strength to get better value for its currency on 37.5 occasions out of hundred whereas 62 occasions went in pocket of Europe. The major reason of Euro outperforming the US dollar is its positive economic data since October 2013. EZ Purchasing Manager Index Manufacturing, German IFO Current Assessment Survey and German IFO Expectations Survey have shown positive output which has supported Euro to gain heavily against the US dollar. But, the dollar is again gaining strength with better US jobs data, increase in non-farm payrolls and positive expectations from December 2013 fed taper. USD which is hanging around the 52 week low is expected to turn back soon with positive flow of US economy. Also, the dark clouds on European economy which have risen due to shocking ECB rate cut and French S&P downgrade is playing important role in the uplift of US currency.

This high uncertainty in the currency prices has brought in several pros and cons to the global economy. One side it has increase the Forex risk, volatility, undue price change of commodities, etc. whereas on other hand it has increase the liquidity, multi currency trade, better settlement, etc. Individuals are also getting attracted to such currency movements which is resulting in investment opportunity for individuals facilitated by Forex brokers. Forex brokers are providing services like trading account, research reports, competitive commission on trading, etc. increasing their business across borders and again increasing currency flow round the globe. USD and EUR the most concentrated currencies by these individual investor to have short-term gains bring in more speculation and making the fight of superiority tougher.

The other noticeable factor is the bounce back of US dollar from the near point of 52 week low. This is making the graphical representation of price movement reverse from the yearly low which in future can be expected to repeat the one year cycle again. It will be a nice economical fight to watch on between these two giant economies and seek the out performer entering with bang in the year 2014.

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