Downgrading the credit rating of Portugal by Moody's 4 notches to Ba2 from B
with a negative outlook could contain the market sentiment putting pressure on the single currency following warning from S&P credit rating agency about the direction of France to help Greece by supporting its private sector for reinvesting its holding of short term debts of Greece to longer periods ones in what can be turning around a direct announcement of restructuring the Greece's debt by France which will be considered a default by the credit rating agencies which can put pressure again on the single currency in the coming period.
The single currency is trading now at 1.445 After it could reach 1.4576 versus the greenback in the beginning of the week on the European Fin ministers' approving of giving Greece the second part valued 12 billions euros of the EU and the IMF planned 110 billions euros package which has been prepared nearly a year ago for supporting it reducing its exposure to the bonds markets directly.
The single currency has started to rise from 1.4102 versus the greenback recently taking advantage from the Greek government ability to gain the confidence of the Greek parliament by 155 majority to 143 as it has been interpreted into another succeeding on approving of its austerity plans and that's what has been done by this same majority to avert default over the short term because of the lenders insistence on having an agreement in the Greek parliament on these required measures in the forms of cutting the governmental spending, hiking the taxes and going forward in privatization public assets in Greece by giving Greece more funds.
God Willing, The single currency is expected to face resisting levels versus the greenback now at 1.4576 then 1.4695 whereas it has formed its recent lower high below 1.4939 which is the next resisting level and the pair higher high and these double tops have put the pair under technical pressure to fall before finding a bottom at 1.4072 and in the case of getting down further from here, it can meet supporting levels at 1.4326, 1.4238 then 1.4102 which has formed the pair higher bottom above 1.4072 which helped the pair to rebound again breaking 1.441 to where we are trading now.
The markets will be waiting tomorrow for the ECB's interest rate decision which is expected to be hiking the interest by another 0.25% to be 1.5% as Trichet has come back saying in the press conference following 9th June meeting that strong vigilance is warranted from saying after May meeting which always refers to a coming hiking decision instead of saying that the ECB is very closely watching the prices which always hints to the markets that there is no close rate hike decision. So, it is important also to wait for Trichet's language in the press conference following the ECB meeting to know more about the single currency interest rate outlook and the current ECB's economic assessment of the inflation upside risks and also the growth of the euro area which is expected to show today rising by 2.5% yearly in the first quarter of this year.
Kind Regards
FX Market Strategist
Walid Salah El Din
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