The EUR USD fell slightly in late Asian trading after Moody’s downgraded Spain’s sovereign debt rating.
The EUR USD fell slightly in late Asian trading after Moody’s downgraded Spain’s sovereign debt rating, but it soon reversed back up after investors realized the cut wasn’t as big as estimated.
Moody’s cut Spain’s rate from Aaa to Aa1, but said it was looking for a stable outlook. They could have said “conditions are expected to worsen” or “conditions are likely to improve”, but choosing to say “stable outlook” allows it to remain neutral just in case new problems develop.
Although there was no published consensus as to how big of a cut would take place, investors reacted as if this cut was too small to warrant a drastic shift from the long-side of the market.
Technically, although upside momentum is slowing, the Euro remains in a strong uptrend. As long as the major 50% level at 1.3510 continues to hold, then look for more upside action with 1.3677 the next target.
Today’s U.S. GDP report will be watched closely. The pre-report guess is for +1.6%. Anything less than this will crush the Dollar, sending the Euro sky-rocketing higher. A number greater than 1.6% will trigger a profit-taking break in the Euro, setting up a potential closing price reversal top.