What Are You Going To Do When The US Fingers Are Broken?

As the main rival of the US dollar, the euro fell against the 1.08 pass against the dollar on Tuesday, reaching a low level of 1.0734, the lowest since August 2003.

The weakening of the euro has raised the market's call for parity in the US and Europe.

"Considering the rapid depreciation of the euro, we expect that the euro will fall to parity with the US dollar in the year to the end of the two quarter," said Divyang Shah, IFR Markets global strategist.

The last parity between the euro and the US dollar dates back to early 2003.

For investors, there may be a whole new understanding of the foreign exchange market pattern in the key nodes where the US dollar index is worth more than 100 points.

We introduced to investors yesterday that the current two points of death in the euro have always been sluggish: first, the differences between European and American policies make us bond spreads widening; the two is that the Greek problem still bothers the market.

And then how the market is going to break, maybe the key is here too.

The dollar touched a 12 year high against the euro Tuesday, hitting a eight year high against the yen, as the European Central Bank

And expect the US Federal Reserve (FED) to raise interest rates in the year.

The US dollar index hit the highest in September 2003, while the euro fell to the lowest level of $1.06925 against the dollar in April 2003, and euro to Japanese yen also hit 129.48 of the lowest in August 2013.

The dollar rose against the US dollar on Tuesday.

The US dollar was the fastest in 34 years.

The euro fell 23% against the dollar in the past year.

Referring to recent US economic data, Douglas Borthwick, managing director of Chapdelaine Foreign Exchange, said: "the US data seems to support the Fed's view of raising interest rates this year," he said. The strong US employment report released last Friday was a coffin for the fed to raise interest rates this year.

Brown Brothers Harriman foreign exchange strategist Win Thin, speaking of higher risk emerging market currencies, said: "those who expressed good money in the US Federal Reserve's interest rate at close to zero interest rates did not perform well when the Fed began tightening policies."

Last Friday, the gorgeous non farm employment data of the United States greatly increased the possibility of raising interest rates by the Federal Reserve in the middle of the year, which provided a strong impetus for the rise of the US dollar.

In February, the number of new non farm workers in the United States increased by 295 thousand, exceeding 235 thousand.

The unemployment rate was 5.5%, down from 5.7% in January.

In addition, on Monday, Fisher, chairman of the Dallas Federal Reserve, said that the Fed should raise interest rates as soon as possible.

Meister, chairman of the Cleveland fed, also said that employment and inflation were close to targets, and the Fed would announce interest rates as soon as June.

The European Central Bank launched quantitative easing on Monday, dragging down European bond yields and the euro's collapse.

Deutsche Bank's Research Report on Tuesday predicts that the euro will fall to parity against the US dollar before the end of the year, down to $0.90 next year and drop to $0.85 in 2017.

Just 12 months ago, the euro was at a 18 month high, close to $1.40.

But in one year, the euro fell to 22.5% against the dollar.

How should we interpret the post market situation?

In fact, I believe that for most investors, the recent strong upward trend in the US dollar is more or less expected.

As we mentioned above, these factors are actually summed up in the following aspects:

Last Friday, strong non farm employment report may be ordered.

Interest rates are raised ahead of schedule, while the European Central Bank is starting to implement quantitative easing.

2. The German 30 year bond yields fell to a record low on Friday. On the contrary, the 2 year interest rate in the US is still at the peak of this year, which weighs the euro against the US dollar.

Greece still bothers the euro.

Among them, the change of capital flow is undoubtedly the focus of investors.

Careful investors may have noticed that the pound may be relatively strong against the US dollar in comparison with other non US currencies in recent days, especially on Monday.

Why did other currencies fall sharply? The pound also has a good performance.

At present, the yield difference between British and German ten - year bonds has risen to the largest since 2004, and the yield difference between the US and Germany ten - year bonds has risen to the largest since 1989.

As a result, more high-yield capital flows out of the euro into the US dollar and some of them flow into Britain.

For investors, it may be trading opportunities.

So, is the new question coming? Will the euro still fall? Can it catch up with the euro? Most market participants obviously believe it will, but here we should also remind investors of the risks involved.

At present, the risk of chasing the euro is mainly concentrated on the following points:

Europe's recent data has warmed up, but has not been able to prevent the euro from falling.

Will the market continue to choose to ignore it?

2. There is also a signal that deflation may end in the euro area.

The 5 year Euro inflation swap rate measures market expectations for future prices in the euro area.

This index rose sharply in early March and rose to its highest level since early December 2014 last Friday.

(3) the recent rise in the US dollar index has shown a more serious overpurchase.

Considering that the index is getting closer to 100 points, whether the profit taking will be gradually accumulated, leading to a sharp adjustment of the positions will be a critical and substantial threat.

Therefore, although the market has been willing to sell the euro in the past 8 months, after such a strong and sustained decline, parity may not be achieved overnight, but rather depends on strong US data, and the market continues to ignore the improved European data and inflation expectations.

So even if the euro seemed to be crumbling last week, it might still encourage sharp market congestion in the next few days and weeks, especially if the eurozone appears to be out of the woods.

"As important US dollar currencies exceed more than a lot of previously considered high expectations and touch on the established trading targets, many market participants naturally question whether the trend is excessive and may be amended," a bank analyst in Paris, France, wrote to clients.

However, he said, "we are still doing more dollars, and the euro target against the US dollar and the US dollar is still 1.05 and 125 respectively."

Focus: Greek cash is in urgent need, loan technical consultation opens.

Having said so much, we should return to the most practical news.

Today, the European Union and Greece will begin technical consultations on loans. Given the current financing pressure on Greece, such consultations will remain crucial.

Earlier, the eurozone finance ministers warned Greece that "time is running out" and agreed that financial experts from Greece and international lending parties will begin technical consultations on Wednesday to secure future financing.

Some impatient euro group chairman Dicer Blom said after the meeting on Monday.

"We have discussed this question for a long time," he said. "In only four months, we should finish this work."

The new leftist government of Greece has been arguing over the form and location of the negotiations, which has put patience in other euro zone partners.

The Greek government is eager to show voters its commitment to end the EU imposed plan.

As a compromise, Dicer Blom said financial experts from Greece and the European Commission, the European Central Bank and the International Monetary Fund (IMF) will hold consultations in Brussels on Wednesday, while previous negotiations on the EU rescue plan are held in Athens.

The pace of consultation remains to be seen.

According to the euro group's agreement last month, if Greece wants to get more funds before the current EU bailout plan expires at the end of June, it must pass the final test to prove that it is carrying out economic reforms in order to cope with huge debts.

Dicer Blom admits that Greece is under great pressure to find funds to repay debts that are about to expire.

But he said such pressure should be a driving force for agreement between Greece and its creditors.

However, he also said that if Greece indicated that it was implementing some reform measures, it was hoped that some funds would be issued before the end of next month's audit.

At present, Greece is likely to run out of funds later this month as Greece is excluded from the capital market, international loans are frozen and tax revenue is down.

Banks and government sources told Reuters on Tuesday that Greece would use more than 500 million euros of bank bailout funds, which is facing cash tension this month and is trying to find money.

This month, the Greek government needs to repay 1 billion 500 million euros to IMF, and it needs to refinance short-term treasury bonds of about 3 billion 200 million euros.

To help alleviate the approaching crisis, the Greek government plans to spend 555 million euros on the Greek financial stability fund (HFSF).

Greece used the silver industry relief fund in 2012 for capital restructuring of major banks.

If there is more positive progress in the relevant consultations, it is expected that the euro will continue to take a breather in the near future. Otherwise, the euro will become more crowded if it continues to drag on.