Spain joins the European meltdown with JP Morgan speculation spooking risk further

EUR/USD
Range: 1.2641-1.2708
Support: 1.2625
Resistance: 1.2760

The bad news just keeps coming for risk as if jitters from Spain and Greece were not enough. Spain has now added to the risk off sentiment as rating agency Moody’s cut the long term debt and deposit rating of 16 Spanish banks. There are reports circulating this morning that JP Morgan Chase loss from derivatives trading may widen to $5 billion. Technically EUR/USD looks oversold as we approach the 2012 lows of 1.2625 but with nothing but bad news from Europe I don’t rule out a test of the 1.2500 level.

GBP/USD
Range: 1.5731 – 1.5792
Support: 1.5680
Resistance: 1.5850

The sterling rally seems to be technically over following a dismal week for risk that has seen warnings from UK politicians and the BoE that more stimulus can be added if the European debt crisis crosses the continent to the UK. Cable has traded through the 50% Fibonacci retracement at 1.5768 overnight and with a weekly close below 1.5780 looking increasingly likely the outlook for cable remains bleak.
USD/JPY
Range: 79.18-79.48
Support: 78.80
Resistance: 79.80

USD/JPY dropped a big figure yesterday following a weak reading from the Philadelphia Fed Data and the pairs demise continued in Asia with rumours in Tokyo doing the rounds that the BOJ will leave the policy rates unchanged in its meeting next week. Japan’s Finance Minister Azumi managed to stop further losses to the pair with a comment that ‘some speculators over reacted yesterday leading to a sudden rise in the JPY and that they will closely watch the currencies and take appropriate steps‘.