Morning Futures Roundup

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Euro Climbs Despite Portugal Downgrade

 Fundamentals

Traders continue to buy the Euro despite continued uncertainty over the sovereign debt of several of its member nations. Most recently in the spotlight is Portugal, where an austerity measure was defeated by the Portuguese parliament which caused its Prime Minister, Jose Socrates, to resign. The defeat of this measure caused the ratings agency Fitch to downgrade the countryís debt by two notches and opens of the prospects that the country will also ask for a bail-out from the European Union. Though the sovereign debt issue looks to remain problematic for the near-term, some traders seem to be focusing on the prospects that the European Central Bank will raise interest rates sooner rather than later, as the Central Bank fears that inflationary pressures may become out of hand should the continued low interest rate environment remain in place. Next up for currency traders is the 2-day EU summit in Brussels, where EU leaders are expected to discuss ideas to ultimately resolve the sovereign debt crisis. However, should the parties involved in the discussions fail to come up with an acceptable plan for dealing with the debt, some traders may once again look beyond potentially higher interest rates and pressure the Euro lower once again.


 Technical Notes

Looking at the daily continuation chart for the Euro FX futures, we notice the market has been in a rather steady uptrend since the yearly lows were made back in January. Since that time, the Euro has rallied about 1400 pips. Prices continue to hold above both the 20 and 200-day moving averages and momentum, as measured by the 14-day RSI is positive, with a current reading of 63.81. Although bulls still appear to be firmly in control, the potential double-top formation, as highlighted on the daily chart, could be a bit worrisome to Euro bulls, especially if the market cannot make a new intermediate high above resistance at 1.4276.Recent trading volume has been steady, but a bit below the trading volume we saw back in January. Resistance is seen at the November 4th high of 1.4276, with support found at the March 11th low of 1.3751


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