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Published On: Mon, Sep 1st, 2014

The EUR/USD slid to a one-year low early on Monday

The euro continued its poor performance, touching a one-year low against the US dollar; disappointing euro zone economic figures, combined with the raging Ukraine crisis, promise to keep the euro suppressed.

The EUR/USD continued its downtrend, touching a one-year low, after disappointing euro zone economic figures.

The EUR/USD hit a fresh low in early Monday morning, on expectations of a weak German second quarter GDP readings and anxiety about the Ukraine crisis. The euro slid to $1.3119, its lowest since September 6, 2013. As of 8:48 am GMT it is trading at 1.3139. The EUR/USD will probably be supported around the 1.31 level, while near term resistance lies at 1.3196.

The situation in Ukraine is being scrutinized by anxious investors. Peace efforts last week failed to yield any resolution and left the military tensions continue unfolding throughout the weekend. Later on Monday negotiations are scheduled between Ukrainian and Russian politicians and separatists, yet expectations are not set too high.

Sanctions against Moscow will surely affect the euro zone economy adversely. If today’s negotiations do not result in peace, sanctions will probably increase in the coming weeks. That simple calculation has also pressured the euro recently.

Official figures released today showed that Germany’s GDP had shrunk 0.2% in the second quarter, which matched expectations. German Manufacturing PMI data disappointed investors by coming out at 51.4, with forecasts being for 52.4.

Both Manufacturing PMI-s in France and Italy, the euro zone’s second and third largest economies, were below the 50-mark, indicating contraction. The French figure was 46.9, while the Italian number came out at 49.8, both lower than July’s reading and disappointing analysts’ expectations.

Staggering growth in EU major economies, like Germany, France and Italy, would increase the pressure on the ECB to implement new easing measures to aid the weak euro zone economy. Its next monetary policy meeting is on Thursday.

The EUR/CHF hit a two-year trough of 1.2047 on Thursday last week. Until then it has been unable to stage a meaningful correction. As of 8:48 am GMT it is trading at 1.2064. This fueled speculations that the minimum EUR/CHF exchange rate floor of 1.20 could be breached. The SNB President Jordan, however, let speculators know in an interview on Sunday that the central bank stands ready to defend the level in its efforts to protect Switzerland from deflation and recession.

On the first day of the week, the USD/JPY looks close to breaking through its last week high of 104.20, which would expose the 105.45 major resistance. Currently the USD/JPY is trading at 104.24.

With markets closed for the Labor Day holiday, trade volumes will probably remain thin today.

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