Despite the announcement of a new European treaty for a new governance of the euro area last night, the rating agency S & P decided to place the notes on negative watch for long-term debt of fifteen countries in the euro area, among them six countries rated “AAA” including Germany, Austria, Finland, France, Luxembourg and the Netherlands. This morning the euro has opened down slightly against the U.S. dollar at 1.3383 against 1.3394 late Monday, the market apparently relativizing this announcement. Field stock, the impact is more noticeable since the CAC 40 opened the day lower by 0.8% to 3176 points after a rebound of 1.15% to 3201 points yesterday. Financial stocks were hardest hit, especially with Credit Agricole -5.1%, with Societe Generale and BNP Paribas -4.3% with -3.1.
Fundamental Analysis EUR USD
The beginning of the week was positive for the majority of European stocks and the euro because of the hope generated by the announcements of European leaders on a plan to control the debt crisis through stricter enforcement fiscal discipline in the area. This plan was presented, in outline, in Paris yesterday and should be the basis of discussions at the European Summit of the weekend.
However, rating agencies have once again thrown the disorder in the markets. Indeed, the rating agency S & P placed on negative watch notes of indebtedness of fifteen countries in the euro area which means that there is a probability greater than 50% note that these countries be reduced by three months. Among the countries most threatened cities, France, under pressure from the recent S & P and Moody’s against the country. Note also that France is the only country for which S & P plans to lower the rating by two notches debt to “AA” .
Although the news is dominated currently by policy statements on the announcement of S & P, the traders now see to be careful as the announcement of quarterly GDP in the euro area and German industrial orders.
Technical Analysis EURUSD
EURUSD fell to 1.3336 in late Asian session, its lowest level since Nov. 30.This morning at 8 am (Paris time), the euro bought 1.3383 dollars against 1.3394 at the close yesterday after a small bounce Monday morning with its highest point at 1.3461. Our vision remains bullish for the pair on the next day as the announcement of S & P is somewhat tempered by the market and is not in itself a surprise. However, the upside potential is limited and the resistance at 1.3550 should act as insurmountable barrier for the moment. stabilization around 1.34 is expected for the next twenty four hours .
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