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Euro Falls then Recovers after Spain Downgrade

Discussion in 'Forex Daily News & Outlook' started by forextrends24, Apr 29, 2010.

  1. forextrends24

    forextrends24 New Member

    Mar 27, 2009
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    Today’s sample of Forex Analysis from ForexHound.com

    The Euro tumbled to a new low for the year after Spain’s debt was downgraded to AA. Traders initially sold off the Euro in a knee-jerk reaction, but selling pressure quickly dried up. Although the Euro reached a new low for the year, the selling pressure was not as intense as Tuesday’s reaction. This was because investors had already discounted the possibility of the downgrade.

    After bottoming about mid-morning, trading stabilized in the Euro until the early afternoon when the Federal Reserve released its policy statement. The FOMC kept interest rates at historically low levels and left its somewhat dovish statement intact. In other words, rates are to remain low for “an extended period”. Although the Fed sees improvements in the economy it still feels that unemployment is a problem as well as tight consumer credit. Furthermore it thinks the housing market can be improved. Once again the Fed stated that inflation is expected to be “subdued”. The Euro’s rally accelerated to the upside after the Fed’s statement was digested.

    Wednesday’s trading action seemed to be indicating that traders had faith that a resolution between Greece and the EU/IMF would be reached soon. This was probably the reason for the less aggressive trading on the short-side. In fact, the way the market traded, it looks as if bottom-pickers were stepping in. At the close, the Euro formed a closing price reversal bottom which could lead to a 2 to 3 day rally and a retracement to 1.3403.

    Read full article at ForexHound.com as well more Forex Trading articles including Forex Technical Analysis and Forex Education

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