With today’s euro rally a few other important market events may have been overlooked by traders.
Strong equity gains were seen in Asia despite a potential downgrade of the Japanese sovereign credit rating by Moody’s Investors Service. The rating agency has put Japan on a review for a downgrade citing fiscal challenges and “a weak policy response” which could result in further difficulties for the Japanese government to reduce the nation’s debt. Following the report the yen was sold versus the US dollar as the USD/JPY climbed to a high of 81.76 before falling back to 801.57. Resistance comes in at 82.00 from the previous trend line off of the May low. Support is at 80.70.
Global equities were higher with Asian bourses leading the way. The Nikkei and the German DAX are trading up almost 2.00% and the London FTSE is up by 1.00% on the day.
Fitch was the latest rating agency to reduce the sovereign debt rating of Cyprus, bringing Fitch in line with both S&P and Moody’s ratings for the EU nation. Fitch noted a high exposure to Greek sovereign bonds including almost EUR 14Bn.
As previously noted the euro is up not only versus the dollar but in the crosses. However, the buying did not carry over into the European trading session with the euro stalling at previous resistance levels. The EUR/USD is testing 1.4425 with potential follow through to 1.4590. The EUR/GBP failed to breach the 0.8750 level and traded back at 0.8726. Next resistance is 0.8840. The EUR/CHF is up sharply from its all-time low to 1.2280 with the next barrier at 1.2320.
This afternoon the gains in the euro and in equities could continue should US consumer confidence numbers come in above market expectations. Chicago PMI and the Bank of Canada overnight rate may also add some volatility to this afternoon’s New York trading session.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
