Source: ForexYard
The EUR sunk to its lowest level since early October following comments by both Moody’s and Fitch. The rating agencies criticized last week’s EU economic summit which fell short of a solution to the current fiscal problems. There is a risk of additional sovereign credit downgrades before the end of the year which would weigh on market sentiment and the EUR.
Equities are off to a poor start today with the Shanghai Composite finishing lower by 1.9% to close on a 33-month low. Today we’ll be getting a slew of data releases from Europe. This morning there will be UK CPI which is expected to show a decline from last month’s high. Should inflation come in under last month’s 5% reading this would support additional QE from the BoE. The GBP/USD has support at 1.5520 followed by the November 25th low of 1.5420.
German sentiment is expected to fall further as the EU economy looks set to slip into a recession. The EUR/USD has support at 1.3145 from the October low. A break here will put 1.3050 in play, the 61% Fibonacci retracement of the 2010-2011 rally from 1.1875 to 1.4940. Resistance is found at 1.3210 the November 25th low and 1.3240 the bottom of the channel line from December.
The highlight of the day will be the FOMC meeting. No policy changes are expected though the Fed could restructure some of its methods of communication with the public. The recent appreciation in the USD/JPY appears to be a result of overall USD strength rather than JPY weakness as the JPY is strengthening in the crosses. As such the USD/JPY could find resistance at 78.50 from its long term trend line from 2007.
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