EURUSD Movement
For the 24 hours to 23:00 GMT, EUR ended flat against the USD and closed at 1.2859.
The Euro came under pressure after Standard & Poor’s lowered Spain’s long-term credit rating to ‘BBB-’ from ‘BBB+’ and cut its short-term credit rating to ‘A-3’ from ‘A-2’, citing mounting economic and political risks as the government considers a second bailout.
Yesterday, the International Monetary Fund warned that if the Euro-zone governments fail to solve the debt crisis, the region’s banks could be forced to sell as much as $4.5 trillion worth of assets, more that an earlier estimate of $3.8 trillion. Moreover, Fitch Ratings stated that the Euro-zone members could suffer further credit downgrades, citing major risks that include the region’s debt crisis and a slowdown in China.
Meanwhile, in a bond auction, Italy’s Treasury auctioned €8 billion of 12-month bonds at an average yield of 1.94%, up from 1.69% previously and the highest level since mid-August.
On the economic front, German wholesale prices rose at a more-than-expected pace of 4.2% (YoY) in September, against the expectations for a 3.3% rise. Separately, the French industrial production rose 1.5% (MoM) in August, against the expectations for a 0.3% decline and compared to a 0.6% rise in July. Meanwhile, the Italian industrial production decreased 5.2% (YoY) in August, compared to a 7.2% fall in the previous month.
In the Asian session, at GMT0300, the pair is trading at 1.2866, with the EUR trading 0.05% higher from yesterday’s close.
Today morning, the International Monetary Fund Managing Director, Christine Lagarde stated that Greece should be given an extra two years to meet its budget targets and that it would take time before Athens is able to reduce its deficit to agreed levels.
The G7 meeting and ECB’s monthly report scheduled to be released later today are likely to receive increased market attention. Meanwhile, trading trends in the pair today are also expected to be determined by the release of the consumer price index in Germany and France.
The pair is expected to find support at 1.2823, and a fall through could take it to the next support level of 1.2781. The pair is expected to find its first resistance at 1.2911, and a rise through could take it to the next resistance level of 1.2956.
The currency pair is showing convergence with its 20 Hr moving average and is trading just below its 50 Hr moving average.
