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Beranda / Managed Forex Accounts EUR/USD Outlook 2008 2/3

Managed Forex Accounts EUR/USD Outlook 2008 2/3

By mid-2008, the global financial landscape had shifted dramatically. What began as a U.S. housing and credit issue was rapidly transforming into a broader financial crisis. For managed forex accounts, this period tested risk management discipline as volatility intensified across all major currency pairs—especially EUR/USD.

This second part of the series examines how changing fundamentals and rising uncertainty reshaped the EUR/USD outlook during the middle of 2008.

Mid-2008: From Confidence to Caution

In the first half of 2008, the euro continued to benefit from relative economic strength and higher interest rates. However, cracks began to appear beneath the surface. Financial institutions across Europe started showing exposure to U.S. credit markets, reducing the perception that the Eurozone was insulated from the crisis.

Key developments included:

  • Escalating losses among global banks

  • Liquidity tightening across financial markets

  • Rising energy and commodity prices

  • Increasing concerns over global recession

As uncertainty grew, market sentiment began to shift rapidly.

Shifting Central Bank Expectations

Interest rate differentials remained a major driver, but expectations started to change. While the U.S. Federal Reserve had already cut rates aggressively, pressure began mounting on European policymakers as economic data weakened.

Markets started to price in:

  • Potential slowing of the Eurozone economy

  • Reduced tolerance for inflation-focused policy

  • Future rate cuts rather than rate hikes

This change weakened the euro’s yield advantage and reduced bullish conviction.

Heightened Volatility Challenges Managed Accounts

Mid-2008 was marked by sharp, unpredictable price movements. Trends that previously held for weeks began to break within days—or even hours. For managed forex accounts, this environment required adaptability rather than rigid positioning.

Professional managers adjusted by:

  • Reducing overall exposure

  • Shortening holding periods

  • Increasing reliance on volatility-based risk models

  • Avoiding overconfidence in long-term directional trades

Capital preservation became the primary objective.

Risk Aversion and Capital Flows

As risk aversion intensified, global capital flows began favoring liquidity and perceived safety. Although the U.S. economy was at the center of the crisis, the U.S. dollar increasingly benefited from its role as a global reserve currency.

This dynamic led to:

  • Reduced demand for higher-yielding currencies

  • Unwinding of speculative euro positions

  • Faster reversals following risk-off news

Managed forex accounts closely monitored shifts in investor psychology rather than relying solely on economic data.

Technical Breakdown Signals

From a technical standpoint, EUR/USD began to show signs of exhaustion by mid-2008. Long-term bullish trends weakened, and key support levels came under pressure.

Technical characteristics included:

  • Increased false breakouts

  • Lower highs forming on rallies

  • Rising volatility without clear direction

These signals suggested a transition phase rather than a continuation of earlier trends.

Strategy Evolution in Managed Accounts

Successful managed accounts during this period emphasized flexibility. Instead of committing to a single macro narrative, managers blended short-term technical signals with evolving macro risks.

Common tactical shifts included:

  • More frequent profit-taking

  • Tighter drawdown limits

  • Increased use of defensive positioning

  • Selective participation during high-impact news

The goal was consistency, not prediction.

Conclusion

Mid-2008 marked a turning point for EUR/USD. What had been a relatively stable macro-driven trend evolved into a volatile, sentiment-driven market. For managed forex accounts, success depended less on directional bias and more on disciplined execution and risk control.

This transitional phase set the stage for the dramatic currency movements that would follow later in the year.

Part 3 will examine late-2008 developments, crisis escalation, and how EUR/USD dynamics changed as global markets entered full-scale financial turmoil.



Summary:

Forex Managed Accounts update: Where the EUR/USD is heading in 2008! Why the USD weakend in 2007, where US Economy is going and how the US presidential elections may affect the financial markets!



Keywords:

Forex Managed Accounts,forex,economy,



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What Rate Cuts Can Be Expected


The US Fed has not exactly been forthcoming in its rate cuts; rather, it lowered rates very reluctantly in 2007. It has given only what the currency markets have already priced in. The basic reason for their hesitation is the desire to contain inflation ? the very same concern that weighs heavily on all other central banks in the world. The Fed wants to make certain inflation remains under control. Doing that has been more difficult because of the high energy prices coupled with the weaker dollar. Thankfully, indications of energy prices reaching $100 per barrel are no longer in circulation.


The market expects the Fed to further ease interest rates another 25 to 50bp lower; however, this is not the only option. They may want to further explore their other options, including the Term Auction Facility they introduced in December. But these options, including a cut in the discount rate, are limited especially since LIBOR rates have remained at high levels. Even as late as December, Treasuries posted one-day increases that were the highest seen in the last three years.


Who Else Might Make A Play


In the final two months of 2007, the crumbling markets were shored up by massive investments from sovereign funds. Temasek Holdings, owned by Singapore, invested $4.4 billion in Merrill Lynch; state-owned Abu Dhabi Investment Authority plowed $7.5 billion into Citigroup; and, China Investment Corporation invested $5 billion in Morgan Stanley. Sovereign wealth funds have been in existence since the mid-twentieth century. From an estimated $500 billion total size in 1990, these funds are now thought to be worth $3 trillion. The states of Norway, Singapore, the U.A.E., Saudi Arabia, Kuwait and China have between them an estimated $2 trillion available for immediate spending. Given eight more years, these funds may have total capital of $12 trillion, continuously built up from their natural resources and foreign exchange reserves. Investments from sovereign wealth funds have ? and probably will continue ? to be significant factors in helping the US financial markets recover.


How the 2008 US Presidential Elections May Affect Financial Markets


The historical trend shows more bullishness for the US dollar when Republicans gain leadership than Democrats. Whether this trend will hold depends on how close the 2008 elections will turn out. The Stock Traders Almanac makes the general observation that election years show modestly positive growth in the US stock market. In the last five decades, election years have shown a 9.2% average gain in the Dow Jones index.