Euro Continues to Climb; Dollar Soars Versus Yen as S&P Cuts Japan’s Debt Rating

The Euro continues to climb higher this morning,challenging the .618 retracement level of the 1.4282 to 1.2873 at 1.3744.

The Eurocontinues to climb higher this morning, challenging the .618 retracement levelof the 1.4282 to 1.2873 at 1.3744. There may be a technical bounce off thislevel, but this action will most likely represent profit-taking rather than achange in trend. Both technical and fundamental factors are supporting therally at this time, so if a top is formed it will come as a surprise.

Fundamentally,the Euro is benefitting from several factors including improving economies inthe Euro Zone, general acceptance of the austerity measures, successful debtauctions in troubled countries and talk that the European Central Bank ismoving closer toward raising interest rates.

PresidentObama’s State of the Union speech on Tuesday may have also inadvertently helpeddrive the U.S. Dollar lower. His failure to offer a concrete plan to curb the U.S.deficit turned traders against the Dollar, driving up the Euro and the othermajor currencies.

The U.S.Dollar is posting a strong gain against the Japanese Yen this morning afterStandard & Poor’s lowered its rating on Japan’s sovereign debt.

Upsidemomentum indicates that the Dollar/Yen seems poised to move toward the lastmajor swing top at 83.68. At this time it is continuing to pivot on both sidesof a key 50% retracement price at 82.71 and a Fibonacci resistance level at83.14. The move by the S&P Corp. is expected to have long-termramifications so it may take time for the Japanese Yen to weaken.

OnWednesday the Federal Reserve announced it would leave interest rates unchangedbut continue to press on with its plan to pump about $600 billion into theeconomy. Traders will now return their focus toward looking for improvements inthe U.S.economy, but with the large budget deficit still looming gains could be limitedand are likely to be treated as selling opportunities.

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