The dollar was both up and down during the European trading session after Moody’s put a number of Italian banks credit ratings on review.
A failed test of the 1.4200 level and the euro continued to build on yesterday’s rebound with the EUR/USD climbing as high as 1.4300 and taking out a number of stops on its way higher before falling back to 1.4200 after Moody’s said it may downgrade 13 Italian banks. The warning comes on the heels of last week’s warning of a potential cut to the Italian government’s credit rating due to weak growth forecasts and the potential fallout from the Greek debt crisis. The 1.4200 is the current line in the sand for the EUR/USD and a weekly close below this level would be significant for pushing momentum in favor of euro bears. 1.4115 is the next support followed by 1.4070.
Cable is trading at its opening day level after a failure to breach the March pivot. BOE Governor Mervyn King’s comments today were not largely shrugged off by the market and cable has kept its head above water today. Traders should eye the 1.5935 level. A break here and the GBP/USD could decline to the late January low at 1.5750.
The yen has erased all of yesterday’s losses to the dollar but remains locked in a range between 81.40 and 80 for the past two weeks. I’ve expected the yen to perform better given the declines in global equities and general risk-off environment. The yen is stronger in the crosses but versus the USD/JPY has been stagnant.
The data piece to close out the week is the core durable goods orders for the month of May. While consensus expectations are for a comfortable 1.0% rise, a surprise to the downside will likely bring a bid to the US dollar as this would show a further decline in the US economy.
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