No ‘V’ bottom bounce for the euro as of 7:47 PM PST in the United States. The euro continues its drop in early trading, down -1.05%.
The key psychological level to watch on the euro is Friday’s low at 1.0909. A break below this critical psychological level could result in another massive sell-off.
Euro Fall Nightmare For ECB
The drop in the euro is a nightmarish scenario for the ECB as the prospect of a European Union breakup reenters the conversation.
New polls show a populist backlash against the European Union is growing. Close to 50% of people living in France, Germany, Holland, and Italy would support a UK-like referendum regarding their EU memberships.
The chart below shows high public support for UK-like referendums on EU membership.
[graphiq id=”hDVBLsr4tql” title=”Poll: Other EU Countries on Holding a Referendum” width=”440" height=”530" url=”https://w.graphiq.com/w/hDVBLsr4tql” link=”https://www.graphiq.com/wlp/hDVBLsr4tql” link_text=”Poll: Other EU Countries on Holding a Referendum | Graphiq” ]
Euro Contagion Spreads To The US Via US Dollar
The anticipated intervention by the Japanese to push down the yen, and the euro already falling, puts a bid under the US dollar.
Currencies are measured in relative value to each other. Japan weakening its currency pushes the US dollar up. The euro falling in value drives the dollar up. The more the US dollar rises, the more export business we lose which causes job losses across the manufacturing sector.
The ISM Manufacturing Index is just barely holding above the 50 contraction line.
Could Brexit push the ISM Manufacturing Index back below 50? Yes.