- Fitch cuts Spain to AA+ from AAA, outlook stable
- Spain to extend talks with labor as it seeks reform; talks going badly
- Spain cuts economic forecasts
- UK’s Cameron: No economic recovery without deficit cuts
- US personal income rises 0.4% in April, spending flat
- Chicago PMI falls to 59.7 from 63.8 in April
- Canadian budget deficit smaller than forecast
- S&P 500 loses 1.25%
EUR/USD fell for much of the US session, pressured by central bank sales between 1.2420 and 1.2450. Several very large buy orders from German banks helped send the euro higher in Europe (one reportedly for EUR 2.5 bln) but the market was unable to sustain the higher levels. We broke below the 1.2400 level in early NY trade and never looked back.
Markets were extremely thin and choppy, whipping repeatedly between 1.2310/20 and 1.2380 before finally slumping sharply from 1.2370 to 1.2284 when the Spanish downgrade hit the news wires.
EUR/USD fell as low as 1.2277 on stop-losses below overnight lows just above 1.2280 but buying out of China helped halt the decline and sent the market into a quiet consolidation late in the day ahead of the Long holiday weekend.
The key takeaway from today’s trading was that EUR/USD was unable to sustain gains above the daily downtrend line at 1.2440, keeping the pair technically vulnerable.
USD/JPY was forced back below the 91.00 level on EUR/JPY stop-loss selling even prior to the Spanish news. Stops below the 111.80 level were triggered at midday as equities lost ground. A 111.35 low was put in after Spain’s downgrade.
Commodity currencies help up well despite modest risk aversion today. CAD was boosted by it strong fiscal position and AUD benefited from buying against the soggy EUR. It closes at 0.8475.
A very bright start for cable finished very badly as the pound slumped from 1.4612 intraday highs to end the day at 1.4465. Stops are eyed at 1.4420 and 1.4400 and may be vulnerable over the long weekend.
Have fun on Monday, Sean. Gerry and I will miss you!
