Financial markets were shaken up in the Tuesday morning with risk-aversion dictating direction. The catalyst triggering the declines in the euro, the US equity indexes and drop in crude oil were credit downgrades Portugal and Greece - which was downgraded by S&P to junk status. The euro shed over 100-pips against the greenback from above the 1.3340-mark to slide toward the 1.32-level following the downgrades. Amid heightened uncertainty over the contagion in the Eurozone, traders scaled back risk across the board with crude oil sliding by over 2% to $82.41 per barrel.

The dollar and yen benefited - advancing broadly against the majors. The greenback edged up to 1.0178 against the Canadian dollar and pushed the euro down to the 1.32-level. Markets largely shrugged off the economic reports released earlier in the session, which included the Case-Shiller home price index, the Conference Board's consumer confidence survey and the Richmond Fed manufacturing survey. The Case-Shiller home price index fell by more than expected in February - declining by 0.9% versus a 0.4% drop in the previous month. The Conference Board's consumer confidence survey printed sharply better than forecast, rising in April to 57.9 and outpacing calls for an improvement to 54.2 from 52.5 in March. Meanwhile, the Richmond Fed manufacturing surged with the composite index printing at 30 from 6, manufacturing shipments to 30 from 5 and the services index improving to a reading of 9 versus 0 from March.

Euro sell-off triggered by credit downgrades

Credit downgrades by rating agency S&P to Portugal and Greece sparked a sharp sell-off in the euro versus the dollar by over 100-pips to trade around the 1.32-mark, its lowest level since May 2009. Greece's credit rating was downgraded to junk status to BB+, with S&P stating that the government's policy options are narrowing because of Greece's weakening economic growth prospects, at a time when pressures for stronger fiscal adjustment measures are rising adding that it's sovereign credit worthiness is no longer compatible with an investment grade rating. Downward pressure will likely remain for the euro as markets exhibit heightened uncertainty over whether the bail-out loan will be sufficient in overcoming its deficit crisis.

EURUSD will find support at 1.3150, followed by 1.3130 and 1.31. Subsequent floors are eyed at 1.3070, backed by 1.3040 and 1.30. On the topside, interim resistance starts at 1.32, followed by 1.3240 and 1.3270. Additional ceilings will emerge at 1.33, backed by 1.3340, and 1.3380.