EUR/USD technical analysis round-up: July 28

The euro slightly decreased in value against the US dollar today, trading at 1.4361 at approximately 7:40 A.M. GMT.

So far today the EU currency is down 0.049% and has reached a session high of 1.4377 and a session low of 1.4331.

The euro stabilized against the dollar and the yen on Thursday as concerns about the debt crisis in the Europe continued to plague the markets following Standard and Poor’s announcement that it would once again downgrade Greece’s debt ratings.

Standard and Poor’s announced on Wednesday night that it would lower the debt rating of Greece by two notches,  from CCC to CC, due to the rising debt crisis within the country.

In an ominous move, Standard and Poor also attached a note of “negative outlook” to Greece’s debt paying abilities, meaning that the agency considers a further deterioration likely in the coming months.

The agency believes that the new plan to bail Greece out with almost 160 billion euros, agreed upon by EU leaders on July 21, “is equivalent to a partial default” payment and will most likely result in “losses for private creditors.”

In addition to this announcement, the market also reacted to comments made by German Finance Minister Wolfgang Schäuble on Wednesday. Schäuble was quoted as saying that he refused to “sign a blank check” to use the European Financial Stability Facility (EFSF) to buy back the bonds of countries in financial turmoil.

During the recent European summit in Brussels,  Eurozone leaders agreed to authorize the EFSF to conduct buybacks on the secondary debt market, in an attempt to contain the debt crisis and prevent it from spreading to other European economies.

Moody’s recent decision to lower the rating of Cyprus by two notches to “Baa1”, due to fears about the precarious financial situation of the country, also weighed heavily on the euro.

“While the markets were focused on the problems of U.S. debt, Schäuble’s remarks reminded investors of the problems of the euro area, which led them to abandon risky assets including the euro,” said Dai Sato from Mizuho Corporate Bank.

In the United States, the lack of progress in talks between Republicans and Democrats to raise the U.S. debt ceiling just five days before the deadline, is still negatively influencing the dollar’s performance.

Many investors fear that the current impasse between the two US political parties could result in a US financial crisis and a subsequently lead to the downgrading of the United States’ rating, even if an agreement were to be found in the proverbial eleventh hour.

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