By: Barbara Zigah

In early trading in Tokyo, the common currency edged higher against the U.S. Dollar, off a 3-week low, supported by early indications of some restabilization in the commodities markets. Analysts note, however, that Greek fiscal problems will continue to put pressure on the Euro until a path to resolution is clear, and unwinding of long positions in EUR/USD are likely in the short term as more negative news surfaces. As reported at 9:50 a.m. (JST) in Tokyo, the Euro was trading at $1.4368 against the U.S. Dollar; yesterday it had slipped to a low of $1.4254. Major support is seen at $1.4246.

Yesterday, the Standard & Poor’s credit rating agency cut Greece’s rating again, dropping it from BB- to B, essentially considered junk status. S&P further noted that it was likely that Greece’s debt burden was unsustainable without a debt haircut. In spite of last year’s bailout, Greece’s economy continues to struggle out of a deep recession, and speculation is swirling that even a new, more favorable rescue package will be unlikely to help.

On a positive note, analysts don’t believe that the Greek fiscal tragedy will have the same detrimental effect on the Euro as it did last year, given that a safety net is now available to heavily indebted countries in the Eurozone.