The common currency has been under selling pressure yesterday evening as Standard & Poors downgraded Italy’s credit rating from BBB+ to BBB, which is two notches above junk territory. S&Ps said that Italy’s output is declining and its economic prospects are getting worse it also said that another downgrade may come in 2013 or 2014, holding a negative outlook. The
EURUSD ended up at support around 1.2760 from 1.2895 that has been trading earlier, in addition ECB attitude towards accommodative policy increases selling pressure on Euro and probably the down trend would continue.
Furthermore, the US dollar Index rose above key
resistance at 84.50, to 84.72 ahead of the release of FED minutes of the 18-19 June meeting. Investors are greatly anticipating about this to get more clues as to when the FED may reduce bond buying. Current $85 bln per month asset purchases is discussed to be decreased and is likely for US dollar to be a winner at the end of the day as in general aggressive monetary policy tends to weigh on related country’s currency value.
Otherwhere, the British pound dropped to a new 4-month low at 1.4812 on US dollar strengthening but the selling pressure was also increased due to weaker than expected Manufacturing and Industrial production releases on Tuesday. The Japanese Yen has been seen strengthening, with USDJPY escaping from 101.21/100.76 tight sideways zone, currently is trading at 100.49. Improving economic data for Japan indicate that the economy is getting into the recovery path, with inflation latest data displaying an upward tendency and that reduces expectations of further stimulus by BOJ. Thus the JPY may be seen gaining value against other major currencies. At the chart below we can see a basket of currencies versus the Yen chart (
using GeWorko PCI) where the equally weighted Euro, AUD and GBP are plotted against Yen. Double top reversal signals downtrend initiation with recent retracement going as high as double top's neckline at 1.0021 confirming reversal pattern and increasing speculation that Yen would strengthen against those currencies.
