EUR/USD: 1.2503
The Euro had a choppy session but has ended up not too far away from this time yesterday as the issues in Spain and Greece remain in focus. Bond yields in Spain continue to ignore the weekend bailout package, rising to 6.83%, and in the process, dragging Italian bonds higher to 6.2%. To add to the days woes in Spain, Fitch downgraded another 18 banks and said that it expects Spain to remain in recession until the end of 2013. Today’s data on Spanish house prices did nothing to help and an 11.1%yoy decline in May adds up to an overall 30% fall since house prices topped out. Even worse, the ECB said today that it suspects there is another 15% to come
Over in Greece, things are becoming pretty tense ahead of the election and the market appears to be squaring up and unwilling to take too much risk until the result is known. It is apparently still too close to call, and as polls have been banned, there is little clarity on who is likely to win.
Elsewhere, Cyprus, which appears to be the next EU domino that is going to fall, has apparently gone to Russia for a Eur 5bio loan.
The stock markets seem a bit punch drunk in attempting to assimilate all the bad news. Even the IBEX in Madrid managed to rally today (+0.2%). Elsewhere the DAX finished +0.33%, CAC +0.14% and the S+P+1.17%. This followed some pretty dovish talk from a couple of Fed governors, raising the hope of some stimulus being added to the US economy through an injection of funds via QE3 and looks likely to limit the downside for the current session.
So the Euro has traded within a choppy range, and I suspect this will be the same game plan today and it looks to me as though 1.2450/1.2550 should cover it. Given that the markets appear exhausted by the bad news and that the indicators continue to flatten out, I suspect we won’t be too far away from here come Friday night.
The daily indicators continue to unwind from the recent selloff, and given the mildly higher momentum I doubt we should expect too much downside pressure before the weekend.
Further out the parameters remain unchanged from the last few days: That is:
Below today’s 1.2448 low would probably lead to minor support at 1.2380 and below this would see an acceleration to last week’s 1.2280 low.
On the topside, having seen 1.2525 short term resistance tested, but so far held, it remains the first level to overcome. Above this, we now have minor Fibo resistance at 1.2555, 1.2580 and 1.2610. Beyond here we would progress to Mondays high of 1.2667. .
German CPI , EU Industrial Production, US Retail Sales, PPI, today
