Credit Ratings Downgrades Pressure the EUR

The EUR continues its decline against the Dollar on concerns the credit ratings of more European nations will be lowered. Spain had the outlook on its debt grade cut to “negative” from “stable”. Greece’s credit ranking was reduced one step to BBB+ and Portugal’s outlook was revised to “negative” from “stable”.

Economic News

USD – USD Mixed Against Major Currencies

The Dollar experienced a mixed trading day yesterday, advancing on the Yen but staying little changed against the EUR and U.K. pound. The dollar rose above 76 earlier and lately bought 75.996 and compared to 75.987 on Wednesday. The USD dropped as much as 1.3% versus the New Zealand while the Australian Dollar rose 1.1% against the greenback.

The number of people in the U.S. receiving unemployment insurance continues to decline, dropping to the lowest level since February. The US trade Deficit also declined unexpectedly as a weak Dollar boosted exports oversees.

Looking ahead for today, the US Retail Sales is expected to be released at 13:30 GMT and the Prelim UoM Consumer Sentiment at 14:55 GMT. With mostly better than expected economic data seen lately from the U.S., worse than expected results might prove quite volatile for the USD pairs.

EUR – EUR under Pressure over Ratings Concerns

The EUR was under pressure Thursday over concerns of high debt levels of some of its member countries. Greece had its rating downgraded and Spain had its outlook lowered to negative. Portugal was also warned of a possible downgrade. Late Thursday the EUR was unchanged at $1.4730 and at 129.94 Yen from 129.41 Yen. The Pound was at $1.6274 from $1.6270.

The currency posted little reaction to Thursday’s decision by the Bank of England to leave its key lending rate unchanged at a record low 0.5%. The Bank of England also maintained its asset-buying program at 200 billion pounds ($326 billion), in line with the economists’ forecasts.

While positive economic data continues to come from Germany, Euro-Zone’s largest economy concerns about sovereign ratings in the Euro-Zone’s smaller countries and the potential for choppy economic growth seem to be putting downward pressure on the EUR at the moment, possibly pushing it even lower against the USD.

JPY – Yen Declines as Risk Appetite Returns

As the stream of positive economic data from the U.S continues, the Yen continues to decline against the Dollar as well as riskier currencies as demand for higher-yielding assets returns. The Yen traded at 129.97 per EUR in today’s early trading, after weakening 0.4% yesterday and was at 88.43 against the Dollar. With a return to risk appetite, the JPY returns to be the primary funding currency.

OIL – Oil Prices Decline for 7th Day

Crude levels declined for a seventh straight day, ending at a two month low Thursday as concerns of oversupply and low demand persist. Light, sweet Crude Oil for January delivery on the New York Mercantile Exchange settled down 13 cents at $70.54, the lowest level since Oct. 7th.

With renewed attention to supply and demand, confidence that demand in the world’s biggest energy-consuming country is recovering is deteriorating. With gasoline supplies at the highest level since April and a stronger Dollar, investors’ appetite for commodities continues to decline. With few fundamentals supporting high Oil prices, there is room for Oil level to decline further.

Technical News

There is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the hourly chart’s Momentum oscillator also supports this notion. When the upward breach occurs, going long with tight stops appears to be preferable strategy
The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 1 hour Chart’s RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.
The pair’s bullish momentum continues with full steam, as it crossed the 88.80 level yesterday, and seems ready to test the 89.25 level. Should a breach occur, another bullish move might take place.
The typical range trading on the hourly chart continues. Both the RSI and Slow Stochastic are floating in neutral territory. The hourlies are also providing mixed signals with no specific direction. Good strategy might be to wait for a clearer signal before entering the market in this pair.

The Wild Card

Silver prices are testing new lows on a daily basis now as a breach through $17.75 was made yesterday. The daily chart shows that the price has lowered beneath the Bollinger Bands, indicating that the downtrend has more room to go. This could give forex traders a great opportunity to enter a very promising trend.

Written by