By: DailyForex.com
The Euro continues to downtrend as Spain’s fiscal problems continue to plague investors who are concerned about the country’s bailout prospects. Heaping on investors’ anxiety, yesterday Standard & Poor’s downgraded Spanish sovereign debt to a level just above what is considered “junk” status, reflecting a negative outlook with significant risks ahead to growth and performance. Investors are still waiting for a similar downgrade by Moody’s Investors Services which has not yet completed their full review.
Investors understand that the Spanish government will need some financial aid of its own, in addition to that already requested for its banking sector, but the worry is that the longer the government delays in an official request the nearer they edge to the point where they require a bailout from their international lenders.
As reported at 12:10 p.m. (JST) in Tokyo, the EUR/USD pair was trading at $1.2845, a decline of 0.2% from late New York trading, and near the $2.2825 low struck on October 1st. The currency continues to be under pressure, and could test support of the 200-day moving average of 1.2823. One analyst believes that if the pair breaks $1.28 it’s likely to see a significant drop of as much as 200 or even 300 pips, and the latest economic news of a worsening global slowdown could precipitate that.