Forex - EUR/CHF to retest record low on EU debt, U.S. downgrade
Investing.com
Published Aug 08, 2011 09:38AM ET
EUR/CHF hit 1.0784 during early U.S. trade, the daily low; the pair subsequently consolidated at 1.0830, tumbling 1.18%.
The pair was likely to find support at 1.0707, Friday’s record low and resistance at 1.1138, the high of August 4.
The European Central Bank said in a statement late Sunday that it “will actively implement” its bond-buying program, indicating that it will likely buy Spanish and Italian government bonds.
However, the news failed to ease fears over the risk that the euro zone’s debt crisis could spill over to the region’s third and fourth largest economies.
Meanwhile, concerns over the U.S. economic outlook were exacerbated after ratings agency Standard and Poor's downgraded the U.S. sovereign debt rating by one notch to AA+ from AAA after markets closed Friday.
The ratings agency kept the U.S. rating outlook at negative, suggesting a further downgrade could be possible within the next 12 to 18 months.
S&P said the debt ceiling deal reached by lawmakers to cut the federal deficit by an estimated USD2.1 trillion over a decade did not go far enough and “America’s governance and policymaking is becoming less stable, less effective, and less predictable than what we previously believed.”
U.S. Treasury Secretary Timothy Geithner sharply criticized S&P’s decision, saying the ratings agency “has shown really terrible judgment and they’ve handled themselves very poorly”.
Elsewhere, the euro was also down sharply against the yen, with EUR/JPY plunging 1.45% to hit 110.42.
Japanese Finance Minister Yoshihiko Noda said earlier that he “will continue to carefully monitor market moves”, signaling that the country was ready to continue intervening in currency markets to stem the yen’s strength.
But rating agency Moody's warned that Tokyo's efforts to weaken the yen were ineffective and negative for its sovereign ratings.
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Written By: Investing.com
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