Euro over a barrel?

EUR/USD dropped to its lowest level in seven months during today’s online forex trading on news that the European economy had contracted by 0.2% in the second quarter. The declining price of crude oil has bolstered the dollar in recent days, helping the greenback to extend the gains it made against the euro in August. As of almost 5PM EST, EUR/USD stood at 1.4493, down from 1.4520 Tuesday. Forex analysts charting the trajectory of the EUR/USD over the past two years place the pair near its long-term uptrend support line of 1.4473.

The EU economic slowdown was attributed to several factors, including a decline in exports, consumer spending, and company investment. Crude oil fell to $109.46 a barrel on demand worries tied to the global economic slowdown and news from Royal Dutch Shell Plc and ConocoPhillips that Hurricane Gustav had not caused any damage to platforms in the Gulf of Mexico.

Falling oil prices are likely to increase pressure on the euro in the currency trading market over the coming weeks. Many analysts expect crude prices to plummet nearer the $100 mark, and BusinessWeek reports that some analysts are predicting a price floor of $80 a barrel.