EUR Sinks On Possible Mass Downgrade of Eurozone Countries

Increasing concerns over slowing global growth and worsening European debt crisis are pressuring the forex market. EUR/USD fell sharply after German Chancellor Angela Merkel rejected to raise upper limits of the European Stability Mechanism (ESM). In addition, possible sovereign debt downgrades of European nations and uncertainty are driving EUR/USD lower.

Last week, S&P Ratings Services had warned the markets that it might downgrade eurozone countries if EU leaders fail to come up with a solid plan to solve the ongoing debt crisis. This week, Moody’s and Fitch Ratings said they intend to review European Union sovereign ratings next year. They said that EU leaders offered few new measures and failed to provide comprehensive solutions.

Today we see that the Asian stock markets opened slightly lower after the U.S. central bank’s policy meeting failed to take any new measures to stimulate growth. In addition, weaker than expected U.S. retail sales data affected the financial markets. Investors worry about the impact of the eurozone debt crisis on the fragile U.S. economy. NIKKEI started the day at 8,513.77, previous close was 8,552.81. HANG SENG opened at 18,325.88, previous close was 18,447.17. Fund manager at Schroders Plc, Lee King Fuei said “There’s a potential for further downside in this market. The magnitude of this crisis compared to the one in 2008 is bigger as it includes sovereign risks as well. Policy makers have probably exhausted their fiscal and monetary policy options and they are running out of bullets”.

EUR/USD is trading at 1.3031 by the time of typing and for today resistances are located at 1.3092 and 1.3177. Support levels are 1.3000 and 1.2949.

GBP/USD is at 1.5478. Resistance levels are located at 1.5520 and 1.5590. Supports are located at 1.5420 and 1.5342.

USD/CHF is trading at 0.9452 by the time of typing and for today resistances are located at 0.9516 and 0.9597. Support levels are 0.9368 and 0.9288.

AUD/USD is trading at 1.0006. Resistances are located at 1.0050 and 1.0123. Support levels are 0.9940 and 0.9868.

There are some important economic data releases today. Swiss Producer Price Index data will be released at 08:15 GMT. U.K. Claimant Count Change and Unemployment figures will be released at 09:30 GMT. Swiss ZEW Economic Expectations data will be released at 10:00 GMT. EU Industrial Production report is due at 10:00 GMT. Statistics Canada will release Leading Index and Manufacturing Sales data at 13:30 GMT. U.S. Import Prices report will be released at 13:30 GMT and Crude Oil Inventories data will be released at 15:30 GMT. Japan Tankan Manufacturing and Non-Manufacturing figures will be released at 23:50 GMT.