daily forex news february 26th 2013

Daily Forex News February 26th 2013

FCTOFX: Concerns over the results of Italy's election triggered a massive risk selloff overnight which in turn sent the euro sharply lower and the japanese yen sharply higher. Exit polls show that former Italian prime minister Berlusconi has a strong showing in projections, which could eventually result in a hung parliament. Front runner Bersani will probably win a marginal majority in the lower house getting 340 seats over a total of 630. However projections show that Berlusconi could win a blocking minority in the upper house: getting 120 seats over 315. Majority in both houses is required for the government and the failure to form a coalition could threaten economic reforms in Italy and subsequently reignite the Eurozone debt crisis. And a hung parliament is considered the worst case scenario by analysts as that would paralyze the ongoing economic program and structural reforms.

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Technically EUR/USD dived to as low as 1.3041 and is threatening to taken on an important psychological level at 1.3. EUR/GBP’s break of 0.8604 support overnight indicates a short term reversal which would likely send the cross to 0.8446 support and below. EUR/CHF also dived to as low as 1.2118 and is threatening to go back below 1.21. Meanwhile the sharp decline in yen crosses is worth attention too: the failure to ride on the G20 earlier this month to extend its downtrend argues then yen has bottomed out at least in near term. Yesterday's sharp fall did indicate a near term reversal and the weak GBP/JPY has taken the lead and broke the 139.25 support level. EUR/JPY is set to challenge 117.40 key support level.



Another key development to note was the sharp selloff in US stocks overnight. The Dow Jones edged to a new high of 14,081 but reversed and closed sharply lower at 13,784 down 216 points. The S&P 500 also closed sharply lower by 27.75 points at 1487.85. So far 14000 in the Dow Jones and 1500 in the S&P prove to be difficult to overcome. We have been warning of a reversal in stocks for some time and yesterday's selloff could be the turning point. Now with the 1495.02 near term support broken a short term top is at least formed at 1530.94 in the S&P 500 and we'll likely see the index fall back to 1400 level. More importantly while it's still to early to confirm stocks might be reversing the medium term trend just ahead of the historical high of 1576.09. So traders are strongly advised to lighten up their positions on recoveries.



Looking ahead, markets will be eagerly waiting for the confirmed elections results in Italy. Fed Chairman Ben Bernanke will also testify at the Senate Banking Committee today. US data will be the major focus with hour price indices, new home sales and consumer confidence all featuring.



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daily forex news february 26th 2013

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