FXstreet.com (Barcelona) - Another downgrade has been poured
over Greece, this time was S&P lowering the country's credit
rating to SD (Selective Default) due to the yet uncertain outcome
of its buy-back programme. However, the reaction of EUR/USD was
mute, and the cross continued to grind lower as part of the almost
expected correction after yesterday's highs above 1.3120
The bottom was in the boundaries of 1.3040, picking up pace
afterwards with the shared currency appreciating to the 1.3080
region against the greenback.
… ECB a non-event?
During the European early afternoon the ECB will hold its monetary
policy meeting. However, the broader consensus expects the central
bank commanded by Mario Draghi to stay in the sidelines, leaving
the lending benchmark intact at 0.75% and the balance sheet
unmodified. Investors' would then focus on the usual Q&A
session, although its repeated rhetoric may provoke it to lose its
former effervescence.
The rescue package directed to Spain, once seen as a trigger for
the ECB to step in the markets via its OMT programme, is now at the
very back of the rear mirror. However, the likeliness of a call for
aid by Madrid could well be materialized in the first half of the
next year, as long as its fundamentals do not deteriorate at a
faster pace.
… Reality calls
The broader picture is now telling us that the economic activity
during the third quarter has contracted as expected in the
17-nation bloc: 0.1% inter-quarter and 0.6% on the annualised
basis. Data have thus warned the euro bulls, now stuck in the mid
way between 1.30 and 1.31 and waiting for some major surprise out
of President M.Draghi's sleeves to find another excuse to climb
higher. On top of it, Greece unemployment rate broke the previous
record high, posting 26% in its last print.
In the opinion of expert Karen Jones at Commerzbank, the cross has
finally run out steam in the vicinity of the area at 1.3180, adding
"This should ideally hold the topside and provoke failure.
Immediate support is offered by the accelerated uptrend at 1.3053
and we will need to see a close below here at the very minimum in
order to alleviate recent extreme upside pressure". The analyst
suggests that a breach of the latter would accelerate the decline
to the area around the key 200-day moving average, around
1.2800/1.2788