Another concern of note was Moody’s anticipation of only moderate effectiveness of structural reforms over the medium to long term which will also dampen economic activity. After the downgrade, the lead analyst at Moody’s, Anthony Thomas said that no further action is anticipated on Portugal’s rating this year and he went onto add that he expects the nation to take further steps to combat the fiscal crisis by 2011. All in all, we may see the euro remain under pressure going into the North American trade as today’s announcement by Moody’s paired with the disappointing investor confidence figures will likely weigh on sentiment.
Immediately following the announcement by Moody’s, the EUR/USD plunged from 1.2566 to reach an overnight low of 1.2522.
Taking a look at the daily chart, the EURUSD has extended its two day decline and now looks poised to break below the 10-day SMA after the pair neared overbought territory late last week. Going forward, investors will keep a close out on the 100-day SMA, which coincides with the lower bounds of the rising trend line. A break below this channel may expose the yearly low.
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly
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