FOREXYARD: Forex News Blog

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Dollar Rallies as Euro Tumbles Across the Board Posted: 23 May 2011 05:10 AM PDT This week's trading got off to a fast start with the euro and global equities trading broadly lower following a string of sovereign credit downgrades that began on Friday. The dollar was the main beneficiary of the negative euro environment. The euro has not recovered following Friday's downgrade of Greece's credit rating by Fitch. Compounding on the negative data flow was this weekend's move by S&P to view the Italian sovereign debt outlook as negative from stable. Reports are running through the wires listing Greek requests for further funding needs from the EU/IMF. Should Greece fail to obtain the funding from prior pledges, estimates are for a potential Greek default as early July. Economic data did little to support higher yielding assets as both euro zone and Chinese PMI reports were well below market expectations. German flash manufacturing was off at 54.8 from a previous reading of 58.0 on expectations of 57.6. This was the lowest flash manufacturing data from Germany in 6-months. A combination of the European debt crisis coming to a head and weak economic data pushed the euro, global equities and crude oil lower early in the Asian trading session only to have the selling increase during European trade. Both the FTSE 100 and the Nikkei are down by 1.50%. Crude oil has again slipped below the $100 a barrel mark and is trading lower at $97.50. The euro sold off across the board as the EUR/USD plunged as low as 1.3969, a level that coincides with the 100-day moving average. The pair has since come off its lows to trade at 1.4035 but momentum remains to the downside. The next major levels that come into play are between 1.3910 and 1.3860. The former is the 50% retracement level from the January to May move. The latter is a previous support level. The 17-nation currency is also down sharply in the crosses with the EUR/CHF falling to a new low while the EUR/GBP moved below its recent consolidation pattern before regaining some lost ground. There is a lack of economic data on the calendar this afternoon and this may leave the euro vulnerable to further declines in the New York trading session. Read more forex trading news on our forex blog.

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