About half a year ago I wrote a post FX markets about to get interesting again!. The main point I was trying to deliver is that volatility in forex space could shoot up significantly. Since then this is exactly what has happened in most currency pairs against the dollar. I believe it’s not over yet, in fact it could only be starting. We could say there was one exception, that was EUR/USD. Until now.
The same post could have been written for any almost other currency some time ago, let that be GBP, JPY, AUD, CAD,… But as a European I am for obvious reasons focusing on the EUR/USD pair.
The goal of this post is not to bore you with details. If you’d wish to discuss the topic, give me a shout. But now let’s get straight into it.
Here is a monthly chart of EUR/USD currency pair dating back to 1980s.
We can see that the the pair broke below a major trend-line support. If the price stays below 1.10 I wouldn’t be surprised if the price reaches parity soon. If the dollar bull picks up pace, then 0.85 is very likely next.
So, if you’re holding euros, you’re risking of losing more than 20% of value of your savings against the dollar. Thus, the rationale is to sell them for dollars if and only if the price is below ~1.10.