Spanish Debt Problems Trouble the Euro

There is some new concern emerging over the Euro zone and its currency. A weak Spanish debt auction sparked new concern over the value of the Euro and there is now renewed concern over a prolonged recession within the European Union. The Euro, in turn, dropped quite a bit in price against the U.S. dollar on Wednesday, April 4th, 2012. The Euro had already been struggling over the last several days, but Wednesday’s drop was more significant as it fell from over 1.322 down to 1.314.

Traders around the globe are flocking to the dollar as the EU’s debt problems worsen and joblessness increases. Spain’s debt is only another mark against the Euro and will most likely not be the last. Europe’s Central Bank (ECB) held rates at 1.0 percent, thus sparking even more distrust in the Euro. While the steady interest rate was expected, it did only add to the feelings that Europe’s economy is in trouble.

The Euro’s chart has a similar feel to it. It recently fell below a key support level and it has been extrapolated by some experts that if the Euro closes below this level, there will be deep concerns about the substantial losses that the Euro will be facing. As market movement progresses throughout the trading day, this looks like it will almost be a certainty.

The Euro’s woes have led to an increase in strength of both the U.S. dollar and the Japanese yen. The dollar and the yen both face the smallest amount of hindrances of any of the world’s major currencies, thus making them a safe harbor for traders looking to go long. Of these two, the yen is the top performer as it made gains against even the U.S. dollar in recent trading, with the yen gaining about 0.8 percent for the day against the greenback.

If you look at the EUR/JPY pair, more concern is raised over the Euro’s health. The yen gained about 1.3 percent against the Euro, illuminating the Japanese economy as perhaps the best place for Forex traders to put their money. The growing yen comes after about three weeks of consolidation. Prior to this, the yen was in a definite uptrend. There is strong suspicion that this upward sloping trend is capable of resuming—especially against the Euro—as the EU’s economy worsens in comparison.

If one currency is looking the strongest, it is definitely the Japanese yen. Whether or not this trend is going to continue remains to be seen, but recent evidence indicates that the yen is going to pull away from the Euro and the pound sterling. The dollar will likely continue to increase against these two currencies as well, but its progress in comparison to the yen is still up in the air.

 
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