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| Dollar Under Pressure as Euro Recovers Posted: 27 May 2011 05:12 AM PDT
The euro came off of its daily lows versus the dollar but traders may be tempted to unwind long euro positions prior to the holiday weekend. Japan was downgraded by Fitch Ratings which allowed the dollar to come off yesterday's lows versus the yen. The dollar was down a day after disappointing US GDP data carried over and the euro came back from its sharp losses despite lower than expected inflationary pressures in Germany. The EUR/USD traded up at 1.4240 from 1.4133. Heavy buying has been seen in the Asian trading sessions followed by heavy selling in the US session. One may not have to look very far to identify the source of the buying as yesterday a Financial Times report cited Chinese interest in the Portuguese debt auctions from the European Financial Stability Facility. This would be a positive for the euro in the medium term. For the remainder of the day the EUR/USD could see its gains capped at 1.4280 near the upper boundary of a short term consolidation pattern due to the reluctance of traders to hold positions going into the holiday weekend. A breach below 1.4180 could take the pair lower to the 1.4130 level. Japan was downgraded by Fitch Ratings to negative from stable which allowed the dollar to claw back from yesterday's declines versus the yen. The move by Fitch is not a surprise after the fiscal trouble combined with the earthquake/tsunami/nuclear reactor issues the country faces. The USD/JPY rose to 81.11 from yesterday's weekly low of 80.83. Support comes in at 80.35 with resistance at the previous trend line off of the May low at 81.60. Traders will be following the release of US personal spending later today and judging from recent US data releases could come in on the low side as inflationary pressures in the States have been minute. Pending home sales may also offer a bit of late afternoon volatility as the long weekend approaches with holidays on Monday in both Britain and in the US. Read more forex trading news on our forex blog. |
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