Spain Debt Worries Pressure Euro

The Euro continued to erode following its closing price reversal topearlier in the week. Downside momentum helped drive the Euro closer to theretracement zone at 1.3732 to 1.3660, created by the last range of 1.3428 to1.4036.

The Euro continued to erode following its closing price reversal topearlier in the week. Downside momentum helped drive the Euro closer to theretracement zone at 1.3732 to 1.3660, created by the last range of 1.3428 to1.4036.

A pair of Gann angles could provide minor support today. The first is an uptrending Gann angle fromthe 1.3428 bottom at 1.3788. The second is a similar angle from the 1.2873bottom at 1.3733 today.

The combination of the 50% target and the second uptrending Gann angle createsa potential support cluster at 1.3733- 1.3732. Watch for a technicalbounce in this zone created by either profit-taking or fresh buying.

Fundamentally the U.S. Dollar is gaining ground on Thursday due to fallingoil prices and Moody Investor Service’s downgrade of Spanish government debt.The cut in Spanish debt pressured the Euro as it added to worries that the EuroZone’s debt problems in the periphery nations are close to escalating.

Moody’s cut the rating of Spainfrom Aa1 to Aa2 after its analysis revealed that the cost of restructuring thecountry’s banks will cost more than the government estimates. Moody’s alsocites that because of Spain’sinability to control the fiscal decisions of regional governments, it will havea difficult time improving its public finances.

The move by Moody’s puts risk aversion back on the table leading to a risein the Dollar and the drop in risky assets. News that China had atrade deficit last month also pressured commodity-linked currencies such as theAustralian Dollar, New Zealand Dollar and Canadian Dollar. Although analystscited the recent Lunar New Year celebration as one of the reasons for thedecline, there are whispers that its economy may have overheated and is nowpoised to begin a decline because of global economic weakness.

The Bank of England left interest ratesunchanged as well as its quantitative easing program. The Reserve Bank of New Zealandlowered interest rates in an effort to revive its economy following lastmonth’s devastating earthquake. Look for near-term pressure on the CanadianDollar if both gold and crude oil drop simultaneously. Long Canadian tradershave been enjoying a free ride because the turmoil in the Middle East and North Africa has been driving up both commodities. Thecurrent chart formation suggests the Loonie may be ripe for the start of afreefall.

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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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