EUR/USD Turns Bearish

The euro continued to lose ground against the greenback yesterday. The euro weakened during the European session on media reports saying that the European Central Bank’s program was being questioned by the German Central Bank lawyers. Although EUR/USD bounced after ECB President Mario Draghi defended the central bank’s bond-buying plan and traded as high as 1.2970, fears about Spain and Greece put high pressure on the euro at the end of the day. Yesterday’s price action indicates that concerns about Europe’s situation remain among forex investors.
Spain is expected to introduce new structural reforms and its draft budget plan for 2013 this week. A Moody’s credit rating review of Spain is also expected, and it could downgrade Spanish debt to junk status. Worries about the size of Greece’s deficit also weighed on the euro. Latest reports show that it could be €20 billion, almost two times of previous estimates. Some economists are pessimistic because European Union policy makers lack urgency and continue to focus on austerity. Disagreement between Germany and France on the implementation of the banking union is another element making forex investors nervous. Weakening economic data and political uncertainty in the eurozone suggest that the European economy is likely to remain weak for a long time.
On the other side of the Atlantic, economic data released by the Conference Board showed consumer confidence jumped to its highest in seven months in September. Two separate reports showed home prices rose for another month but the gains were not as strong as the previous month. Federal Reserve Bank of Philadelphia President Charles Plosser said “We are unlikely to see much benefit to growth or to employment from further asset purchases. Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility”.
The Asian stock markets opened lower today as concerns about Spain’s hesitancy to request a bailout soured the sentiment. NIKKEI started the day at 8,941.75, previous close was 9,091.54. HANG SENG opened at 20,486.00, previous close was 20,698.70. Operating officer at Tachibana Securities, Kenichi Hirano said “European troubles are of course in focus, but relatively stable exchange rates are underpinning stocks. Some investors could also be buyers for window-dressing purposes as this is the last trading week of the quarter, but more of that buying might emerge later in the week”.
EUR/USD is trading at 1.2870 by the time of typing and for today resistances are located at 1.2918 and 1.2951. Support levels are 1.2834 and 1.2782.
GBP/USD is at 1.6164. Resistance levels are located at 1.6212 and 1.6242. Supports are located at 1.6126 and 1.6072.
USD/CHF is trading at 0.9392 by the time of typing and for today resistances are located at 0.9419 and 0.9454. Support levels are 0.9362 and 0.9306.
AUD/USD is trading at 1.0353. Resistances are located at 1.0393 and 1.0434. Support levels are 1.0326 and 1.0285.
The economic calendar is light today. U.K. CBI Realized sales data will be released at 11:00 GMT. U.S. New Home Sales report will be released at 15:00 GMT.