The new week begins with fresh four year lows in the EUR/USD as the currency continues to be battered along with risk trades. A combination of less than anticipated US employment data on Friday, continued fear over European sovereign debt and a general mood of pessimism dropped the EUR/USD 45 pips lower on a gap opening to lows that eventually touched 1.1875, a level not seen since late March of 2006. Against the yen the Euro dropped to eight and a half year lows of 108.05. Traders rushed to seek the perceived safety of the yen and US dollar, as risk trades faltered in the face of economic uncertainty.
The culmination of a G-20 meeting over the weekend in South Korea brought no reassuring words from the participants, thus adding to momentum of Euro selling. The Swiss Franc also benefitted as a refuge for the beleaguered as the EUR/CHF pair fell into the abyss to touch a low of 1.3849, uncharted territory for this particular pair.
As mentioned, while the Euro crumbled, the yen and dollar firmed. With Asian equities lower by anywhere from 2% to 4%, yen crosses were dumped without hesitation. GBP/JPY flirted with 131.00, AUD/JPY saw 73.65 lows, and CAD/JPY dropped to 85.25. USD/JPY dipped below 91.00 despite the nomination of new Prime Minister Kan on Friday, a strong proponent of a weaker yen.
The risk off motif helped drop AUD/USD further, sending the pair under the 0.8100 big figure as traders sought safer vehicles in which to put their money, such as the Japanese Government Bonds, which enjoyed a two year high on the back of the malaise. XAU/USD remained buoyed between $1214.00 and $1220.00 while XAU/EUR topped an all time record of $1025.00 per ounce.
With markets on edge and even the slightest piece of news having the potential to spark a landslide of Euro selling, amnesty for the European currency seems unlikely for quite a while. Looking ahead, don’t be surprised if by this time tomorrow the besieged EUR/USD is further along in its free fall, unless somehow the bleeding can be stopped.