The United States’ dollar continued to fall again on Wednesday, February 01, 2012, in relation to the Euro, the British pound, and the Japanese yen. The Euro was the biggest mover, going up about 0.60 percent in relation to the dollar. This marked the latest in a choppy week where the EUR/USD has see-sawed back and forth between 1.305 and 1.320. At the time of this writing, the EUR/USD stood at 1.3167.
Fundamental analysis is dictating the movement of this pair of currencies. In light of the European debt crisis, it seems like investors are very wary of which direction the Euro is actually going to go. And there is good reason for this wariness. The major players in debt relief discussions have been saying that they are near a solution for a couple weeks now, yet no final decisions have been resolved.
In the middle of everything stands Greece. The main problem is that they cannot agree on how to compensate Greek bond holders. Greece is unable to pay the full value of these bonds and the reverberation of this has been felt all over the world.
Still, there is no reason to believe (yet) that a solution will not be solved. Fundamental analysts have given mixed signals, but the upside of investing in the Euro is greater than the downside. The Euro is in no danger of failing. Other countries within the European Union have shown strength, or at least, more economic strength than Greece has. Take Spain for example. They are currently ahead of goals for selling bonds already this year.
The big danger is that people might remain skeptical over how long the debt resolution in Europe is going to take. If this is the case, then the recent highs that the Euro has experienced might actually trigger a massive sell off. This would hurt the Euro greatly and hinder the efforts that European financial leaders are taking to fix this problem. The European Central Bank has issued a warning that credit conditions will remain tightly guarded. This precaution might seem like overkill, but with the economy still looking bearish, it is a necessary precaution.