So much for sub-$1 euros. The euro is headed higher against the dollar and made a powerful move Wednesday and Thursday (March 19) as US financial markets centered on the credit sector. Wednesday, the Fed announced that interests would be left near zero per cent, which put pressure on the greenback.

One euro currently fetches just over $1.365. This marks a tremendous bounce from the near $1.30 price point for the euro early on Wednesday. Along with the Fed rate maintenance, rising oil prices helped contribute to the jump in the euro-dollar ratio. Oil traded to a 2009-high point near $52 Thursday. The euro-dollar traded to an all-time high when gas was near $4 per gallon last July. Low gas prices has recently correlated to gains for the dollar.

The near-term future for the euro-dollar pairing will be an interesting development. Early forecasts for the ratio suggested that a euro could fall to $.95 by the end of 2009. This prediction was somewhat tied to predictions of continued lower oil and gas prices. It seems at the moment like oil, gas, and the euro all are firmly above low projections for the year. The question is has the bottom been reached, or is another dip in store for all three.

A double bottom on near-term currency charts supports the idea that the euro-dollar might have more upward movement in store, despite the call for a lower euro. A double bottom occurs when an investment retests low points and fails to breach the low a second time. The euro-dollar touched down near $1.25 (actually dipping to around $1.23 in March) in both mid-February and mid-March, and each time, surged higher.

Of course, looking farther out on longer term currency charts, the euro-dollar is still on a downward trend for the medium-term. The $1.42-3 point for the euro will provide more insight on the direction of the ratio. A bold move above this level could mean a potential retest of all time highs in the near future. A failure to break above this point could provide a third test of the $1.25 point.

The strong position of aggressively low interest rates maintained by the central bank certainly gives credence to a lower dollar. Mortgage rates are pushing to new record lows and the government has developed a focus on inducing consumers to begin buying homes. This likely means lower interest rates for some time, a policy that makes the dollar a less desirable commodity because of low interest yields against other currencies and investments.

Only time will tell where the euro is headed against the greenback, but the statement the last couple days has been profound in favor of a higher euro.

Neil Kokemuller
1:57 AM EST
Friday, March 20, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.
Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.