Yesterday, ratings agency S&P cut Greece’s sovereign debt to the lowest level in the world. Nonethessl, Forex traders more or less yawned as the EURUSD traded back above 1.4400. All right, bad news yesterday for Greece and the Euro rallies. Last week it dropped on good news from the ECB. So what’s really going on in the Forex markets?
Forex traders are taking it for granted that Greece will need to restructure its debt, and therefore the actual ratings are becoming irrelevant. Unlike Pakistan or Ecuador, whose debt ratings are nearly just as bad, when Greece next taps the markets to raise money, they will do it with assistance from the rest of the EU (most likely Germany) and the IMF. As such, the current driver of momentum in the Forex markets over the last week has been overall risk sentiment. Equities snapped their week long losses yesterday, which caused the dollar to drop. Nonetheless, sharp losses in Oil and Gold prices yesterday showed that riskier assets continue to be vulnerable to selling.
EURUSD
Other than a small drop in early trading, the EURUSD has been forming a nice base just above 1.4400 since yesterday evening. Therefore, if European stock indexes rally on the open, it could trigger a short squeeze and move the EURUSD back towards 1.4500. On downside, Forex traders will be watching intraday support of 1.4370.
Support/Resistance 1.4370/1.4500
GBPUSD
At a current 1.6420, the GBPUSD has risen nearly 200 pips from yesterday’s lows. The move is quite surprising as it came before this morning’s UK CPI figures are released, which could very easily knock the pair back down. As such, the trading action could be revealing that Forex traders are expecting a better than expected figure. Nonetheless, traders should keep in mind that the GBPUSD spiked higher last month when CPI beat forecasts, only to selloff as the day went on.
Forex traders are taking it for granted that Greece will need to restructure its debt, and therefore the actual ratings are becoming irrelevant. Unlike Pakistan or Ecuador, whose debt ratings are nearly just as bad, when Greece next taps the markets to raise money, they will do it with assistance from the rest of the EU (most likely Germany) and the IMF. As such, the current driver of momentum in the Forex markets over the last week has been overall risk sentiment. Equities snapped their week long losses yesterday, which caused the dollar to drop. Nonetheless, sharp losses in Oil and Gold prices yesterday showed that riskier assets continue to be vulnerable to selling.
EURUSD
Other than a small drop in early trading, the EURUSD has been forming a nice base just above 1.4400 since yesterday evening. Therefore, if European stock indexes rally on the open, it could trigger a short squeeze and move the EURUSD back towards 1.4500. On downside, Forex traders will be watching intraday support of 1.4370.
Support/Resistance 1.4370/1.4500
GBPUSD
At a current 1.6420, the GBPUSD has risen nearly 200 pips from yesterday’s lows. The move is quite surprising as it came before this morning’s UK CPI figures are released, which could very easily knock the pair back down. As such, the trading action could be revealing that Forex traders are expecting a better than expected figure. Nonetheless, traders should keep in mind that the GBPUSD spiked higher last month when CPI beat forecasts, only to selloff as the day went on.
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