Concerns over the sovereign debt crisis in Europe extending to the major countries, such as Italy and Spain, which are the third and the fourth largest economies in the European Union respectively, caused a very large wave of panic in financial markets, which caused the indices to drop as well as commodity indices, as the crisis spilling over to large economies such as those is considered a disaster because it is difficult to save them!
The euro is trying to trim some of its losses against the dollar, after it dropped from 1.4061 to reach 1.3835 level, it's now trading above the 1.3910 level, which is considered a support for the trend, and stabilizing above it will keep the euro on its upward trend and if not we might see a continuous drop to test low levels, which may reach 1.3800.
Economic fundamentals from Germany and France are supposed to be positive for the euro, as it indicated that inflation is still above 2.0% (the comfort zone from the ECB), France's inflation rose to 2.3% as well as Germany although it dropped but it's still at 2.3%, but this data for the traders is not as important as any decision or news about the sovereign debt crisis, where fears further increased after the International Monetary Fund didn't give any indication about a solution for the crisis.
Inflation data from the UK indicated a drop in inflation from 4.5% to 4.2% according to the annual CPI for the month of June, which gave a slight hope that inflation may drop further more, also the UK'S trade deficit widened to reach 8478 million pounds, which caused the Pound to drop in addition to the negative pressures from the strengthening dollar.
The sterling dropped after reaching a high of 1.5916 to a low of 1.5778 and is currently trading around its lowest levels between the support level 1.5755 and the resistance level 1.5880 and the current trading is close to 1.5800 levels, which may be the separating line between testing the support and testing the resistance during the rest of today's trading.
The Japanese yen rose sharply against the dollar reaching the highest levels in four months, as it recorded the lowest today at 79.15 and the highest at 80.37, the dollar might drop against the yen so long as the pair is trading below 80.45 levels and we might see the pair testing the 79.00 level, the continuous pessimism in the markets will keep the yen in its upward trend against the dollar.