Possible Euro-Dollar Parity?

The Euro (EURUSD) fell below $1.18 on Thursday. It further fell to $1.1754 following the release of weak data. The Eurozone industrial producer price and confidence readings came below par, which led to the currency’s extension of the longest losing streak in history.

The shared currency was launched on January 4, 1999, at an exchange rate of $1.1789. After its launch, the Euro fell to its lowest level of $0.8230 in October 2000. Since the shared currency’s staggering recovery in the span of almost seven and a half years, it reached an all-time high of $1.6038 in July 2008.

The Euro had mostly seen choppy times after the financial crisis of 2008, except a few spikes. However, in December 2014, it broke its long-term technical support at its 200-day simple moving average. It has tested its 200-day moving average four times since 2003, and has found ample support from there to rebound. However, the break in December points accelerated the currency’s losses in 2015.

Earlier this week, Eurozone reported a negative CPI for the first time in five years. This is believed to be the start of a long deflationary period, and European nations must pull up their socks to fight it. The European Central Bank looks all set to expand its bond-buying program and increase quantitative-easing to fight the deflation. However, Eurozone’s failing economy is not the only reason for the currency’s downfall against the US dollar; it is also because of the USD’s strong rallying in the market.

Both sides of the equation are not favoring the shared currency. The dollar index has soared to its highest level since November 2005. One of the reasons for the strong rallying of the USD is the expected rise of interest rate by the Federal Reserve for the first time since 2006.

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