Forex Market Review – Euro returns early gains; Spain debt woes weigh

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The euro has been repeating the same pattern against the dollar in the past four trading days. Euro gave back all gains made during early European trading, unable to sustain the rally against the dollar. Spain’s banking problems continue to pressure the single currency, pushing Spanish bond yields to record highs and increasing the risk of Spain having to seek an international bailout.

 

EURUSD edged higher going into the Europe session after reaching lows of 1.2508 in Asia, with the pair hitting a high of 1.2573 before fading back to the lower 1.25’s on fresh Spain debt fears. Spanish retail sales released today showed a drop by 9.8 percent in April, the biggest drop since March 2011. Euro is expected to remain above the key psychological $1.25 until U.S. economic data due later today on consumer confidence. Any negative headline news will act as a catalyst to lower levels.

 

GBPUSD was little changed from the European open to the U.S. session open, with lack of significant economic data or headline news keeping markets generally quiet. High of 1.5715 and lows of 1.5665 were hit.

 

USDJPY remains entrenched within today’s ranges of  79.40 and 79.63 with no clear direction.  U.S. consumer confidence data due later could provide some movement.

 

EURJPY is taking direction from broad euro risk sentiment, with the pair mostly mirroring EURUSD today, rising and falling back to initial levels, hovering at lows of 99.59.

 

Aussie got an early boost from news of the possibility of further policy stimulus in China, which is Australia’s major trading partner.  AUDUSD began to rise in the Asian session and into the European return but was unable to break above key resistance at 0.9900 and fell back after hitting a  session high of 0.9896.