Sovereign-debt fear was the theme of the day as the euro plummeted to its lowest level since May 2009 at 1.3325. The catalyst for the euro's woes was a downgrade of Portugal's credit rating by Fitch to AA-minus with a negative outlook. This adds onto mounting concerns that Greece will fail to secure support from the EU Summit, which begins tomorrow and resort to turning to the International Monetary Fund for aid. Risk-aversion largely benefited the dollar, staging a broad-based advance across the board. The US equity indexes were slightly lower and crude oil traded lower by 1.5% on the Wednesday session.
The headline durable goods orders improved by 0.5% in February, slightly less than forecasts and lower from an upwardly revised 3.9% gain in January. The excluding transportation reading posted a 0.9% increase from a 0.6% decline previously. New home sales extended its weakness following January's record decline, down by 2.2% to 308k units and missing estimates for an increase to 320k units for February.
The data for tomorrow will see weekly jobless claims, expected to drift to 450k versus 457k in the prior week. The key highlight will be Fed Chairman Bernanke's Congressional testimony, which had been postponed from February as a result of snow. Bernanke will outline the Fed's exit strategy from its emergency lending facilities while likely maintaining the FOMC's stance to leave interest rates unchanged. San Francisco Fed President Janet Yellen, speculated to be nominated as the next Fed Vice Chairman, repeated that it was appropriate for the FOMC to leave rates low for an extended period and added that she expects the economy to grow below potential for several years.
Credit Concerns hit Euro
The euro slid to an 11-month low on Wednesday trading, failing to capitalize on an upbeat German Ifo sentiment survey as Portugal's credit downgrade dictated market direction. With the EU Summit looming, the euro will continue to trade under pressure as the likely scenario to materialize will be for Greece to turn to the IMF for aid.
EURUSD will find support at 1.33, followed by 1.3270 and 1.3240. Subsequent floors will emerge at 1.32, backed by 1.3150 and 1.31. On the topside, resistance starts at 1.3360, followed by 1.34 and 1.3450. Additional ceilings are seen at 1.3480 and 1.35.