EUR/USD Deflation — Twenty-Five Month Low

Eurozone deflation concerns abound, with the EUR/USD hitting a fresh twenty-five month low this morning.

The daily chart below details the slide, with current supply levels in the ~$1.27 range.  Though one look at the chart makes you think a token bounce is nigh, thus far, there is no sign of a reversal.

EUR/USD with SCMR Trends™ and SCMR Dynamic Levels™. Trend is red (downtrend) with no sign (yet) of reversal. Dynamic Supply ~$1.27

EUR/USD with SCMR Trends™ and SCMR Dynamic Levels™. Trend is red (downtrend) with no sign (yet) of reversal. Dynamic Supply ~$1.27

The reason for the rapid decline is in recent months is deflationary data from the Eurozone.  GDP growth is about to turn negative and CPI (not shown) is at a new low.

With no clear recourse like QE available yet, the best bet for the monetary authorities is to devalue the Euro, in a hope to spark some inflation / make the currency more competitive globally.

How does this affect US markets?  Thus far there hasn’t been much negative followthrough on US equity markets from the strong dollar / weak euro dynamic.