NEW YORK (Forex News Now) – The euro plunged against the dollar in forex trading on Tuesday as fears over euro zone sovereign debt intensified, after Standard & Poor’s downgraded Greece and Portugal’s credit ratings.
In U.S. afternoon currency trading, EUR/USD struck 1.3203, two pips off Friday’s one-year low of 1.3201. The currency pair later pulled back to 1.3207, down a huge 1.31 percent on the day.
Earlier, Standard & Poor’s cut Greece’s credit rating three steps to junk, the first time a euro zone nation has lost its investment grade since the single European currency’s inception in 1999, in shocking FX news.
The spread between German and Greek government bond yields, meanwhile, widened to its widest in 12 years, and the cost of insuring Greek debt surged to an all-time high.
In light of the current forex news, the euro is likely to touch support against the greenback around the low of April 22 last year, 1.2884, and encounter resistance around the high of April 12, 1.3626.
Wednesday’s currency trading news is likely to be dominated by the key interest rate decisions by the U.S. Federal Reserve and the Reserve Bank of New Zealand, and the accompanying statements issued by the central banks. Australia is also set to make forex news, with the release of an important report on consumer price inflation.