Article by ForexTime
EUR/USD dropped to a five-month low of 1.3480, while selling in the EUR-JPY was a driver. The USD/JPY rose to a five-day high of 101.56 during Tokyo trade amid a bullish stock market session before capping out before the US began its trading session. News of another company bond default in China failed to have much impact in the currency markets, as Chinese stocks were in fact up strongly today with the Shanghai Composite up 1%.
Eurozone spreads were mixed, but the recent pressure on the periphery has put pressure on the Euro as easing concerns weigh ton the Euro. The Portuguese 10-year yields is moving higher again despite assurances from ESM chief Regling that Portugal as well as Greece has funds set aside to recapitalize banks if needed. In the cash market, the 10-year Bund yield was up 1.9 basis points at 1.17%. Meanwhile the Italian 10-year was down 0.4 basis points and the Spanish down 1.0 basis points, while the Portuguese rose 3.0 basis points to 3.68%.
Eurozone debt levels rose in Q1, from 93.9% of GDP from 92.7% of GDP in the last quarter of 2013. The developments highlight that the weak growth conditions have put a stop to improvements in overall debt levels, even if pressure on governments to bring ongoing deficits down remains. The Stability and Growth Pact is under threat of being watered-down further and the differences across nations remain large, with Greece, Italy and Portugal posting the highest debt levels, clearly above 100% of GDP.
The EUR/USD sliced through short-term support near 1.3500 and is poised to test the November 2013 lows at 1.3280. Momentum on the currency pair has turned negative as the MACD (moving average convergence divergence) index has generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) has crosses below the 9-day moving average of the spread. The index has moved from positive to negative territory confirming the sell signal.
The RSI (relative strength index) which is a momentum oscillator that measures overbought and oversold level is moving low with price action reflecting accelerating negative momentum while printing near 32, which is just above the oversold trigger level of 30.
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