The Euro Today: EUR Conversion Rate vs Pound Strengthens, Rebound vs Dollar Also Noted

Is this ceasefire on selling the shared currency going to hold, or is this a mere break within which the the euro bears reload?

In this piece we consider the outlook for the euro. Firstly, for your reference, today's (09/09) euro rates.

1. The euro to US dollar exchange rate conversion is 0.12 pct lower on Monday night's close at 1.2879.
2. The pound to euro exchange rate conversion is 0.05 pct higher at 1.2497. For the latest regarding the slump in GBP, please see here.
3. The euro to pound exchange rate conversion is at 0.8004.

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"The euro rebounded against the U.S. dollar (on Friday) on the back of softer U.S. job growth and a ceasefire between Ukraine and Russia.   We will see how long this ceasefire lasts but for the time being, it should bring some relief to European officials," says Kathy Lien at BK Asset Management.

Confirming that a let-up in the EUR sell-off may be on the cards are Lloyds Bank Research: "sentiment towards the EUR remains weak, and while we view underlying bias is likely to remain on the downside for EUR over the short/medium-term, net EUR short positions are already at extended levels. So in the absence of fresh EUR negative news it's difficult to see EUR short positions extend further."

Euro Dollar Exchange Rate: Forecasting Consolidation at 1.28

Asked whether the relief seen in the EUR will last Lien is not optimistic, "unfortunately we believe that today's modest rebound is nothing more than a dead cat bounce for EUR/USD. The Fed will still end QE in October and the U.S. economy is outperforming the Eurozone."

Nevertheless, there is no doubt the euro dollar rate is oversold with the Relative Strength Index (RSI) reading at 23 on the weekly charts.

The last time the currency pair was this oversold was in 2010. Interestingly the ensuing rally following the oversold conditions in 2010 was substantial, taking the pair back to 1.40.

However, we see very little fundamental reasons for a rally to shake up once oversold conditions are corrected.

We have a strong feeling that the support level that lies at 1.28 will prompt a period of consolidation.

A break through here could well see a quick run down to the next major support at 1.20.

Euro to Pound Exchange Rate Forecast - Chaos Until Scotland Decides?

The euro pound rate will likely continue to find relief ahead of the much-anticipated referendum on Scottish independence.

The risk of a break up of the UK financial system is simply a risk currency markets are unwilling to to contemplate via buying sterling.

We would suggest that all fundamental and technical considerations will be put on hold until the results of the referendum are known.

Until then, expect volatility.

If a Yes vote is confirmed then the rally will be substantial. The GBP has much ground to make on the euro following the ECB decision on interest rates announced this past week.

With the ECB looking to expand its balance sheet to 2012 levels we would suggest there is much weakness ahead for EUR/GBP.