EURUSD Holds Biggest Monthly Gains In Four And A Half Years

EURUSD has been in a strong downtrend since May last year. Since May last year, EURUSD has fallen more than 3,000 pips. Analysts had been talking of EURUSD reaching the parity level in the beginning of this month. But that talk faded away when EURUSD started climbing. EURUSD has climbed more than 700 pips in the last 14 days and the climb seems to continue.

The euro held its biggest monthly gain in 4 1/2 years amid signs of life for the world’s second-largest economy, while the dollar rebounded against peers on prospects U.S. growth will pick up after a sluggish first quarter.

Speculators had built up record bets the euro would drop versus the greenback as the European Central Bank started buying bonds while the Federal Reserve discussed raising interest rates this year. That policy divergence remains, after economic reports Thursday underscored the Fed’s assessment that recent weakness in U.S. growth may be transitory.

Now the important question: how long will this rally continue?

A hiatus, not a turning point: that’s the verdict of traders and strategists on the euro’s biggest rally in 3 1/2 years.

The single currency surged more than 3 percent against the dollar in the four days through Thursday, putting it on track for its strongest three-week advance since October 2011. The gains came as signs of inflation shook investors’ faith in the European Central Bank’s commitment to its bond-buying program, sending the region’s debt plunging.

But still expect EURUSD to gain 200-500 pips before it makes a turning point. When  EURUSD turns, it starts falling again and make the analysts happy by reaching parity by the end of this year.

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