Euro Flat after Moody’s Downgrade

The Euro is trading flat after Moody’s became the last of three major credit rating services to downgrade Greece’s debt.

The Euro is trading flat after Moody’s became the last of three major credit rating services to downgrade Greece’s debt. Traders had been waiting for this downgrade and were not surprised by the news. Although this last downgrade is out of the way, traders are not optimistic about the Euro. Many feel that further downgrades of other sovereign debt are likely. Spain and Portugal remain targets of the credit rating agencies. There may be a relief rally, now that the news about Greece is out but don’t expect a change in trend to up.

The GBP USD continued to show weakness overnight. The charts indicate that 1.5940 is the next downside target. Overnight U.K. GDP was revised upward to show a loss of 0.2%. The previous estimate was for a loss of 0.3%. Pre-report estimates were for a loss of 0.1%. Like the Euro, thin holiday trading conditions could lead to a counter-trend move today.

Rising Treasury yields continue to boost the USD JPY. Optimism over an economic recovery in the U.S. is leading traders to sell the Japanese Yen. The recent rise in Treasury Bond and Note yields have become attractive to Japanese investors who have to sell the Yen to buy Dollars.

The Dollar continues to strengthen versus the Swiss Franc. Not only are traders looking for the U.S. economy to recover faster than the Swiss economy, but some investors are factoring in the possibility that Euro Zone sovereign debt issues may spillover to the Swiss financial system.

The strengthening U.S. economy is having a positive effect on the Canadian Dollar. Although the USD CAD has faltered the past three days, this currency pair remains inside of its October to November range. The mid-point of this range is 1.0598. This price is an important pivot. Additional pivot price support comes in at 1.0537.

A shift in risk sentiment is pressuring the AUD USD and NZD USD. Previously, a rise in U.S. equity markets would have led to demand for higher yielding assets like the Aussie and Kiwi, but investors are now selling these currencies while returning to traditional fundamental analysis.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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