Market Focus Shifts to Bond Auctions

Forex investors trimmed bearish bets against the euro yesterday after Fitch Ratings Agency said it is unlikely to downgrade France. However, the lack of agreement by European leaders on how to implement fiscal reforms to prevent contagion puts the region at risk. As we can see from the price action, verbal support without any concrete, strong action is not enough to convince the markets. EUR is under the pressure ahead of debt auctions tomorrow by Spain and Italy. Spain will auction €5 billion of bonds due 2015 and 2016, while Italy is scheduled to sell €12 billion of bills.
Fitch Ratings Agency said Italy poses the greatest threat to the currency bloc’s future and Italy’s credit rating is likely to be downgraded by the end of this month. Without a region wide plan to prevent the sovereign debt crisis from spreading, Italy will be in high danger. Country’s large debt burden and high borrowing costs are affecting the health of the economy. Head of global sovereign ratings at Fitch Rating Agency, David Riley said “Italy is the front line of this crisis, the country’s elevated government-bond yields have marked a profound intensification of the crisis.” at a conference in London.
Operating Officer at Tachibana Securities, Kenichi Hirano said “With the Italian and Spanish debt auctions this week and massive debt refinancing across Europe scheduled for February and March, the risk-off environment will continue”. Meanwhile a senior eurozone government official said negotiations on debt restructuring between Greece and its private sector creditors are expected to reach a milestone early next week with. Sources say the details of the agreement will first be assessed by a group of EU finance officials by the end of this week
Today the Asian stock markets opened slightly higher as recent economic reports and optimism about the U.S. earnings season encouraged investors. NIKKEI started the day at 8,440.96, previous close was 8,422.26. HANG SENG opened at 19,067.99, previous close was 19,004.28. We see that the market participants are still focusing on eurozone but not putting as much weight on eurozone as they were in December.
EUR/USD is trading at 1.2746 by the time of typing and for today resistances are located at 1.2815 and 1.2854. Support levels are 1.2740 and 1.2665.
GBP/USD is at 1.5459. Resistance levels are located at 1.5505 and 1.5560. Supports are located at 1.5451 and 1.5396.
USD/CHF is trading at 0.9512 by the time of typing and for today resistances are located at 0.9550 and 0.9590. Support levels are 0.9487 and 0.9442.
AUD/USD is trading at 1.0280. Resistances are located at 1.0365 and 1.0418. Support levels are 1.0242 and 1.0173.
The economic calendar is light today. Japan Leading Indicators data will be released at 05:00 GMT. U.K. Trade Balance report will be released at 09:30 GMT. E.U. Final Gross Domestic Product figures will be released at 10:00 GMT. U.S. Crude Oil Inventories data will be released at 15:30 GMT. Fed Beige Book is due at 19:00 GMT.



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