FX Headlines: Euro Tumbles as Moody's Downgrades Spanish Debt
Fundamental Headlines• Inflation in Asia Strikes at Core - WSJ
• Prospect of China Bank Crisis Dismissed – Financial Times
• Europe’s Banks Face 5% Stress Test Ratio – Financial Times
• Spain to Reveal Cajas’ Capital Hole in Fight Against Contagion - Bloomberg
EURUSD: The Euro fell to a new weekly low below 1.3800 in the overnight as Moody’s Investor Services downgraded Spain’s sovereign debt rating, from Aa1 to Aa2. The rating service also maintained its negative outlook, stating that the Spanish government underestimated the projected costs to restructure the banking system, and that the region’s financial institution would need “high funding,” an infeasible outcome given the shortfall in the government’s budget.
Taking a look at price action, key resistance looks to be in place at 1.3876, while recent fundamental developments paint a bearish picture for the EURUSD. As of late, the pair failed to hold above its 61.8 Fibo on the November 2009 to June 2010 move. The next level of support is the 20-SMA, at 1.3737. Yesterday I noted that “the pair must hold below 1.3930 on the daily charts for the bearish bias towards 1.3737 to be met”; this is occurring, and going forward, a strong technical setup coupled with poor fundamental news for the Euro lead us to believe that the pair could continue towards its 20-SMA.
Written by Christopher Vecchio, DailyFX Research.
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