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EUR/USD continues to slide lower

Having dropped over 200 pips in the last four trading days, there is no sign that EUR/USD is ready to reverse this trend.

All trading involves risk. Losses can exceed deposits.

This morning’s panicked reaction in equity markets over speculation that a couple of missiles have been launched in the Mediterranean did not work its way into the currency markets. Traders have managed to keep a focus on looming macro issues for the euro/dollar currency cross rather than being distracted by more short-term fluctuations.

It is likely that we will hear from the European Central Bank today as it confirms its intentions to keep interest rates low for the medium term. A more tricky question to answer is when and how much the US will taper its current quantitative easing programme.

In addition, there is the still unresolved US debt ceiling problem. The US is likely to hit its limit around mid-October. On the previous two occasions when this occurred the two major political parties were unable to agree on acceptable spending and tax-raising policies, and as such effectively moved the goalposts. President Obama’s handling of this issue been questionable, leaving markets wondering whether he will manage this next deadline with any greater authority. At present, a compromise minutes before time runs out again looks to be the likely outcome.

Spot FX EUR/USD (DFB) chart

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