EURUSD Movement
For the 24 hours to 23:00 GMT, EUR rose 0.56% against the USD and closed at 1.2932, amid speculation that a ratings downgrade on Spain by Standard & Poor’s would compel Madrid to formally request a bailout, which investors speculated would ease the debt crisis in the Euro-zone.
The European Central Bank (ECB), in its monthly bulletin, indicated that the governments should continue to implement necessary measures to reduce both fiscal and structural imbalances. The ECB observed that the risks surrounding the economic outlook continue to be on the downside. The bank stated that the underlying pace of monetary expansion remains subdued.
Meanwhile, the International Monetary Fund (IMF) backed giving debt-burdened Greece and Spain more time to reduce their budget deficits, cautioning that cutting too far, too fast would do more harm than good, further supporting the sentiment towards Euro.
However, the German Finance Minister, Wolfgang Schaeuble stated that the Euro-zone governments would not share losses on Greek debt holdings. He stated that finance chiefs from around the world meeting in Tokyo this week have acknowledged that Europe has made “significant progress” in overcoming the crisis of confidence in the Euro.
In bond auction, Italian treasury sold €3.75 billion of its three-year benchmark BTPs. The yield climbed to 2.86% from 2.75% at the prior auction on September 13. It also raised €2.25 billion from the issue of bonds maturing in 2016, 2018 and 2025. The yield on 2016 bonds came in at 3.42% and that on 2018 bonds at 4.06%. The 2025 bonds had an yield of 5.24%.
On the economic front, Germany’s harmonized index of consumer prices (HICP) decelerated to 2.1% annually in September, compared to 2.2% in August. Meanwhile, the consumer price index rose 2.0% (YoY) in September, unchanged from the preliminary estimates. Separately, the French HICP rose 2.2% (YoY) in September, slower than the expected 2.4% rise. Meanwhile, the consumer prices fell to 1.9% in September, from 2.1% in August.
Also, Germany’s leading economic research institutes lowered 2012 growth outlook to 0.8% from 0.9%. The institutes forecast 1.0% expansion in 2013, slower than the 2.0% growth estimated in April.
In the Asian session, at GMT0300, the pair is trading at 1.2928, with the EUR trading marginally lower from yesterday’s close.
The pair is expected to find support at 1.2864, and a fall through could take it to the next support level of 1.2801. The pair is expected to find its first resistance at 1.2971, and a rise through could take it to the next resistance level of 1.3015.
Trading trends in the pair today are expected to be determined by the release of Euro-zone’s industrial production. In the US, investors await producer price index and University of Michigan confidence data.
The currency pair is showing convergence with its 20 Hr moving average and is trading above its 50 Hr moving average.
