Euro Tumbles after Spain Downgrade

After a higher New Yorkopening the Euro reversed its course after the S&P Corp. downgraded Spain to AAstatus. Although the Euro reached a new low for the year, the selling pressurewas not as intense as Tuesday’s. This could be because traders had expected it.

After a higher New Yorkopening the Euro reversed its course after the S&P Corp. downgraded Spain to AAstatus. Although the Euro reached a new low for the year, the selling pressurewas not as intense as Tuesday’s. This could be because traders had expected it.

Today’s action seems to be indicating that traders havefaith that a resolution between Greeceand the EU/IMF will be reached soon. This could be the reason for lessaggressive trading on the short-side. In fact, the way the market is tradinggoing into the mid-session, it looks as if bottom-pickers are stepping in andmay send the Euro higher before the end of the day.

Bearish traders should be cautious at current levels so theydon’t get caught in a closing price reversal bottom formation. There are plentyof shorts still in the game, but it isn’t going to take much to encourage theweaker shorts to cover fresh losing positions.

It looks as if traders are going to back away fromaggressively shorting the Euro as long as the EU/IMF is still working out thedetails of the bailout. If anything should happen during the negotiations andtalks were called off, then look for the Euro to plunge. As long as the bailoutdialogue is open, it appears as if traders have priced in the worse casescenario for the time being.

Look for the Fed to leave interest rates unchanged atcurrent historically low levels. Traders should pay attention to the languageof the policy statement. Although the Fed is expected to say that rates willremain low for “an extended period” some believe they may soften the tone abit. This slight shift in language could help strengthen the Dollar into theclose.

The Fed is also expected to say that unemployment andhousing remain a concern as well as the lack of bank lending. Also look for theFOMC policy statement to say that the economy is expanding and that inflationis subdued.

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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