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EUR/USD is establishing  itself in  levels last seen in 2006  with the battle around the 2010 low of 1.1867  seeming to be won by the bears.

The background is the fall of the euro-zone into outright deflation, and a deadly terrorist attack in Paris, which left  at least 11 dead.

The euro-zone reported preliminary inflation figures for December, and the year on year headline CPI dropped to a negative 0.2%, worse than expected. The ECB’s  mandate is 2% “or a bit below” and certainly not a negative number. So, if confirmed in the final read, the euro-zone saw  outright deflation in 2014.

However, this is clearly the result of the plunge in oil prices, which was marked during December. The sliver lining comes from core CPI, which actually edged up to 0.8%. This isn’t the mandate and it’s low on its own, but it does provide some hope for the euro-zone.

In Paris, news broke that terrorists attacked the headquarters of a satirical newspaper called Charlie Hebdo. At least 11 people are confirmed dead. The paper published satirical cartoons, some  laughing at Muslims. All reports lead to a terror attack.

Such a  devastating event in the center of Paris is also weighing.

The low so far is 1.1818. The round number of 1.18 provides support, followed by the next round number: 1.17 was the launch value of EUR/USD in 1999.

Here is the chart showing the recent downfalls:

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Paris attack sends euro lower January 7 2014 technical chart deflation in the euro zone