Despite the lack of economic fundamentals on Monday, yet markets moved strongly, where the U.S. dollar and the Japanese Yen strengthened against major currencies after China decided on Sunday to increase banks' reserve requirements for the fourth time this year to control rising inflation risks, while the S&P dropped a bombshell after announcing a downgrade to the outlook of U.S. debt, which discouraged investors to take risk and they invested in lower yielding assets.
Standard & Poor's downgraded on Monday the outlook for the United States debt to negative from stable, highlighting the risk that policymakers will fail to reach an agreement on how to reduce the country's fiscal problems. The S&P also said there's a one-in-three possibility it could lower the long-term rating for U.S. debt within two years. The S&P meanwhile maintained the AAA rating for the United States.
Meanwhile, China continues to tighten its monetary policy in order to tame inflation, where China had raised benchmark interest rates four times since November, while Sunday's decision to increase the reserve requirements comes as the latest effort by the People Bank of China to control price pressure, while many fear that this will slowdown economic growth in China.
The Dollar index, which tracks the performance of the U.S. Dollar against a basket of currencies including the Euro, the British Pound, and the Japanese Yen, rose strongly on daily basis to trade at 75.73, compared with the opening level at 74.99, while recording the highest at 75.81 and the lowest at 74.97.
Gold prices rose as well today as investors headed for safety, which pushed gold prices to a new all-time record high at $1497.04, while gold is now trading at $1494.15 an ounce, compared with the opening level at $1488.18. Crude oil prices dropped however today due amid expectations of weak demand, where crude oil was trading at $107.01, compared with the opening level at $109.26.
The Euro declined heavily today against the U.S. dollar, where the EUR-USD pair dropped to trade at $1.4217, compared with the opening level at $1.4397, while recording a high of $1.4405 and a low of $1.4157. The pair is trading below the critical level at $1.4280 and so long the pair remains below this level, the target is set at the $1.4170 support level, but breaching the resistance at $1.4280 would send the pair to the $1.4395 level at least.
The Pound also dropped against the U.S. dollar, where the GBP-USD pair traded at $1.6227, compared with the opening level at $1.6315 while recording a high of $1.6328 and a low of $1.6165. The pair is trading below the resistance level at $1.6250 and so long the pair remains below this level, the target is set at the $1.6110 support level, but breaching the resistance at $1.6250 would send the pair to the support at $1.6400.
The U.S. dollar declined against the Japanese Yen on risk aversion, where the USD-JPY pair traded at ¥82.45, compared with the opening level at ¥83.08, while recording a high of ¥83.20, and a low at ¥82.18. The pair is now trading below the level at ¥82.75, and so long it continues to trade below this level, the target is set at the ¥81.45 support level, while breaching the resistance level at ¥82.75 would send the pair to the next resistance at ¥83.50.