Wednesday, 20 Jan 2010

EUR/USD Pair Tumbled After Crossing a Main Support Barrier

The U.S. Dollar continued to press higher against the major currencies today, influenced by China's bank lending restrictions. According to the media, Chinese authorities instructed some major banks to stop lending until the end of this month, amid fears of higher inflation.

EUR/USD rate fell below a key support level, triggering many automatic stop-loss and sell orders. The pair is currently trading at around 1.4100, after hitting a daily low of 1.4079. The EUR continued to suffer from Greece's fiscal problems and from data published today and yesterday by Germany. The German ZEW Economic Sentiment index fell in January to 47.2, in its 4th consecutive drop. Today's German Producer Price Index fell by 0.1% while expectations were a rise of 0.2%. These figures added fears about Europe economic recovery.

Oil and Gold prices continued to slide, explained by a stronger US Dollar, and by China's effort to cool down its economy, which in turn would lower demand for raw materials.