Just read this from dailyfx.com, seems that currency strategists thinks that there are more room to go to the south for major pairs against USD:
Investor sentiment is on the verge of another collapse just as efforts to stabilize economic growth and financial markets have been ramped up. Can global policy officials revive investor and lender confidence before the cumulative pessimism behind underlying fundamental trends picks a direction for the us? We won’t likely have to wait long for an answer. Taking measure of sentiment through yield appetite, we have seen carry trade interest struggle to balance the weak potential for returns with the growing outlook for risk. This past week, the DailyFX Carry Trade Index held back from developing formal follow through with a third dip below 20,000. Nonetheless, the pressure is clear as the composite holds just above a six-year low. This weight was more or less mirrored in the market’s other, favored risk-sensitive assets. The S&P 500 was pressuring support around 800, the EURUSD was eyeing 1.2750 and the ten-year T-note was threatening to drop below 122 (an interesting mix that itself reflects an unusual environment). On the other hand, where price gauges have stumbled, market condition indicators have actually improved (this is among the resistance holding back the currencies from falling against USD). The DailyFX Volatility Index has retraced to 19.3 percent and risk reversals have shown an uptick in optimism among options traders - though, both are still near recent record lows.
When looking at the fundamental clash underlying market sentiment, we are left with little reason to doubt the potential for another wave of pessimism. Over the past few weeks, investors have been given more than enough reason to second guess optimism. The primary concern for investors, consumers, businesses and politicians is the health of the global economy. The IMF has forecasted a 0.5 percent pace of expansion through 2009 – a technical recession for an economy of this scale and put into context, the worst pace of activity since World War II. This forecast may even be somewhat optimistic compared to what speculators are preparing for after the fourth quarter GDP numbers were folded into the mix. The world’s largest economy reported a substantial 3.8 percent annualized slump through year’s end, while activity in the UK slowed 1.8 percent over the same period – the worst contraction in over a quarter of a century for both. At this point, though, the absolute level of these lagging indicators isn’t nearly as important as the pace they have established. As the engine of the decline moves from housing to business activity on to consumer spending, the momentum behind the recession is being amplified. How overwhelming will this trend be? This is a critical question now as US President Barack Obama is pushing through an $800 billion-plus stimulus plan and other policy authorities move towards nationalizing their financial sectors. What is clear though is that sparking optimism after tremendous loses and with such anemic returns will be an extremely difficult task.
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