Nice move by the Euro , after the fed decision yesterday to buy longer-term U.S. government debt and purchase an additional $750 billion of agency mortgage- backed securities, a policy known as quantitative easing.
What happened yesterday is the following:
The Fed decided to Pump money into the system, thinking that would "fix" all the problems. The problem with this is, the Fed does not have "spare cash" lying around, and decided on a whim to purchase and place bad debts on their balance sheets. So, were does a "cash broke" Government find extra scratch to spend. They can't if there is no extras around to be spent, so the next best thing to do is to Print New Money.
When a government prints and distributes new money, they essentially flood the markets with this newly printed currency ... devaluing it across the board.
However This brutal EUR strength will be no help to the EuroZone's economy which is suffering also and it will be interesting to see how the ECB reacts to the challenges posed by the pressure of competitive devaluation. The EU weaklings are all undoubtedly hopping mad at developments here.
The Euro have won 1 battle yesterday , however the big question is, on the long run who will be the first to go out of this disaster and win the war??? till today the fed is moving more swiftly than the ECB to reach that target .
The below chart shows that the next strong resistance for the Euro is between the 1.383 and 1.39 area which coincide with the 61.8 retracment of the( 1.47 high and 1.24.5 low), and the downtrend trend line
