The common currency had overnight surged to nearly USD1.31. | Learn Forex | GoLearnForex.com

The common currency had overnight surged to nearly USD1.31.

Written by article default Monday, 10 May 2010 18:46

Market Overview
With the immediate euphoria cooling after a massive support program for debt-troubled euro-zone countries, the euro pared early gains Monday morning to dip below USD1.29.
The common currency had overnight surged to nearly USd1.31, as the unexpectedly large European Union emergency package and the joint efforts with the European Central Bank and the International Monetary Fund lifted hopes that immediate threats to the European financial system have been contained.
The package totals the equivalent of nearly USD1 trillion in funds, with the ECB agreeing to start buying government bonds in an effective extension of quantitative easing. The Federal Reserve has also agreed to reopen its dollar swap arrangement with five other major central banks to ensure liquidity doesn't dry up.
Euro has recovered from its dip under USD1.29 and has settled modestly above USD1.29, although the US equity performance may jolt it in one direction or the other. EURUSD is up 1.4% since late Fri, while EURJPY has gained 3.4%. The yen remains the day's biggest loser, although it has trimmed its losses in tandem with euro paring gains. EURUSD trades now at USD1.2928. USDJPY trades at JPY93.10 and GBPUSD at USD1.5003.
ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, at 83.551 from 84.407 late Fri.

Market expectation
Greece is still facing difficulties imposing the austerity measures required under the terms of its bailout. Spain and Portugal face risks of their own, as they still struggle to adopt fiscal discipline.
For the time being, euro momentum to the upside could remain strong, helped by the unwinding of the large number of short speculative position in the currency that was built over the last few weeks.
Analysts said that currency reserve managers who have already been shying away from the euro are only likely to avoid the currency even more now.
The euro is about 1.5 cents higher on the day near USD1.2910, in the daily resistance band between USD1.2904 and USD1.2999. A decisive move above resistance would be the signal for a test of USD1.3364. But a move below USD1.2904 would point the euro down to USD1.2742-USD1/2710 support. Technical analysts said.