Forex Update 12 October 2012

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Forex Trading: 12 October 2012

As an immediate reaction to the Spanish credit rating downgrade, the shared currency dropped versus the US dollar.

Nevertheless, it was also speculated that the move would pile pressure on the Spanish government to ask for a bailout from the ECB.

Ironically, that turned the table and pushed for a rebound, with the euro gaining 76 points for the day to $1.2929.

This morning, the euro/dollar pair is gathering a little bit of pace, moving up to $1.2965.

Many FX investors will be keeping an eye out for announcements from the other credit rating agencies, or perhaps even an imminent Spanish bailout request.

Forex Trading: 11 October 2012

In yesterday's currency trading, the euro tumbled sharply as Standard & Poor cut Spain's credit rating from BBB+ to BBB-.

This is just 2 notches above junk status and the country's rising bond yields are keeping a cap on any gains for the single currency.

Despite closing at $1.2851, a 30 point loss for the session, investors seem to be reluctant to take any big short positions whilst a Spanish bailout request is still a possibility.

This morning, the EUR/USD market is at $1.2870, hovering around or just above its recent lows. Key support and resistance is seen at $1.2820/00 and $1.2935/60 respectively.

Forex Trading: 10 October 2012

The FX markets were in a risk-off mood yesterday, as investors rushed into the US dollar following a warning from the IMF that the global economy will expand by less than initially anticipated.

At the same time, Athens saw violent street protests as German Chancellor Angela Merkel visited Greece.

This only serves to remind everyone that implementing austerity cuts is a painful affair which, in some regions, could become a social time bomb.

As a result, the euro/dollar pair lost 82 points to $1.2883 and, this morning, the market is still struggling at $1.2870.

Forex Trading: 09 October 2012

In trying to address the sovereign debt crisis, the Eurozone finance ministers met in Luxembourg yesterday. However, their refusal to give in to speculation about a Spanish bailout request unsettled the forex spread trading markets.

As a result, the euro declined by 55 points against the US dollar to close at $1.2966.

As I write, the ECB President is speaking on the European economy and the single currency is taking a bit of a dive, with EUR/USD currently trading at $1.2935.

Some of today's focus will also be on Athens, as German Chancellor Angela Merkel pays a visit to Greek Prime Minister Antonio Samaras.

The Greeks are desperate to agree some favourable adjustments to their fiscal targets as they are woefully off track.

Forex Trading: 08 October 2012

The positive numbers for the US employment sector kept FX investors fairly optimistic on Friday, giving them a reason to exit the dollar and move into the euro.

Although the Spanish Prime Minister refused to call for a bailout ahead of today's meeting of Eurozone Finance Ministers, the EUR/USD pair gained 13 points to $1.3029.

This morning, the negativity in shares is rubbing off on the single currency, with the market back below $1.3000, at $1.2970.

Forex Trading: 05 October 2012

ECB President Mario Draghi reiterated his pledge to buy government bonds should member countries get in trouble. This encouraged a shift in forex market sentiment towards a risk-on day.

Additionally, the minutes of the latest Federal Reserve meeting indicated that the US rate is likely to stay low until at least mid-2015.

So, amid no change for the key European interest rate, which the ECB left at 0.75%, the shared currency gained 111 points to $1.3017.

This morning, the single currency is just giving a little back, but finding support at $1.3000.

Forex Trading: 04 October 2012

Forex investors decided to stay on the sidelines yesterday, awaiting this afternoon's ECB rate decision and subsequent press conference.

As a result, it was no surprise that the euro moved only marginally lower, falling just 5 points to $1.2908, and saw a very tight daily range.

In addition, many CFD trading investors want to see a clear signal that Spain intends to ask for a bailout before committing any further.

Forex Trading: 03 October 2012

The euro initially enjoyed a rally versus the US dollar yesterday, however, this was interrupted by the announcement that Spain isn't about to ask the ECB for a bailout.

It could be that, when it comes to domestic politics, the Spanish PM has a lot on his mind in dealing with street protesters.

Delivering a message that is acceptable to the Spanish people, the forex markets and the ECB is a difficult affair. However, the euro did manage to close 29 points higher at $1.2915.

This morning, the risk aversion is just pushing the EUR/USD market lower, with the pair at $1.2895 at the time of writing.

Forex Trading: 02 October 2012

UK spread trading investors don't often pay too much attention to interest rate decisions from Down Under.

However, during the overnight session, the Reserve Bank of Australia surprised the markets by cutting interest rates.

The significance of the move is that it has taken analysts and economists by surprise at a time that the Australian economy is still booming.

So far, the antipodean economies have remained fairly resilient in the face of the wider global malaise. In fact, if there has been a safe haven over the last few years, it has been Australia and New Zealand, whose government bonds are still returning attractive yields.

Therefore, when you get a surprise cut in interest rates, it can come as a bit of a shock.

Clearly, from the central bank's point of view, the risks are too great to keep interest rates as high as they were as their biggest customer, China, is slowing faster than was hoped.

The move has knocked the Australian dollar, dragging the AUD/USD and AUD/JPY markets lower. Whilst the rate cut itself is not the main driver behind this morning's negative price action in the stock markets, it has still got the bulls' alarm bells ringing.

Amid plenty of lingering questions regarding the Spanish request for a bailout, the manufacturing reports on both sides of the Atlantic saved the day, pushing the euro 34 points higher to $1.2885.

Better-than-expected figures from Spain and Italy, though still contractions, helped discard some of the recent pessimism over the Eurozone. This put investors on stand-by until Thursday's interest rate meeting by the European Central Bank.

This morning, the single currency is roughly flat against the dollar, trading at $1.2890 at the time of writing.

Near-term support and resistance levels are seen at $1.2840/1.2800/1.2750 and $1.2985/1.3030 respectively.

Forex Trading: 01 October 2012

On the macroeconomic calendar, this week sees a raft of PMI surveys, starting with the European, UK and US manufacturing figures.

We have already seen expectation beating numbers from both Spain and Italy and, although their manufacturing sectors are still contracting, these figures may signal the bottom of the rate of decline.

Despite slightly better-than-expected stress tests for Spanish banks, which need about €53.75 billion versus estimates for €62 billion, the shared currency dropped 56 points against the dollar to end at $1.2857.

Spain is yet to request a bailout and the European Central Bank cannot force it to. It looks like Prime Minister Mariano Rajoy is caught between the need to fix his country's banking system and the growing social unrest that threatens to fuel self determination for regional governments.

This morning's little gain in risk appetite is actually helping the euro, as EUR/USD trades at $1.2870 at the time of writing.

By Simon Denham, 12 October 2012

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