EUR/USD: 1.2060
Spain and Greece continued to dominate the headlines today, with Spanish yields up at 7.61%, as reports began to emerge that Catalonia will need a €3.5bn bailout from the Spanish government, which is apparently considering a full bridging loan type bailout from the EU until the end of the year.
Who would be a politician? They plainly do not have the first idea on how to extricate Europe from its plight and seem to think the easiest way out is to bury their heads in the sand, while talking up the situation.
In Greece, the PM has suggested that the economy could contract by as much as 7% this year, just as the Troika (the IMF, European Central Bank and European Commission) arrived to assess how Greece is going with regards to being allowed to access the next tranche of the bailout funds.
Almost under the radar, Italian bond yields rose to 6.5%, and looks to be the next cab off the rank to need EU assistance.
The news earlier in the day that Moody's had lowered its outlook on Germany to negative did not have too much impact, but certainly made sure that the early session rally to 1.2137 was going no higher once Europe got going.
For much of the session the Euro held up reasonably well, trading around 1.2100, but as equities headed down, the Euro succumbed by dropping to make yet another low at 1.2042. Today the S+P (S+P -1.5%) has played catch up with European markets where the DAX closed -0.45%, although the EStoxx50 was -1.27%.
Technically our 1.2036 target currently remains intact, (61.8% extension of 1.4940/1.2625 commencing at 1.3475) and then of course 1.2000. As I have repeatedly said over the last few months, eventually we are going to see 1.1875 (4 June 10 high) and possibly my long term target at 1.0350. 1.1925 looks to be the only minor support ahead of 1.1875 once 1.2000 gives way.
On the topside we have plenty of minor resistance levels to overcome, beginning at the previous lows of 1.2066, 1.2082 and then the minor congestion where today's 1.2137 high should see sellers. More substantial resistance now lies at 1.2188 (23.6% of 1.2692/1.2041) and although this does not look in danger right now, a quick look at the MACD's and RSI's tell us that, although the step-by-step move lower will probably continue, the building divergence is warning of a corrective bounce. It is therefore necessary to keep stops pretty tight on short positions.
For today use 1.2035/1.2100 as an initial guide, with the German IFO, US New Home Sales to provide the economic data but the real action being dominated by Spain and Greecef 1.2066, 1.2082 and then the minor congestion where today's 1.2137 high should see sellers. More substantial resistance now lies at 1.2188 (23.6% of 1.2692/1.2041) and although this does not look in danger right now, a quick look at the MACD's and RSI's tell us that, although the step-by-step move lower will probably continue, the building divergence is warning of a corrective bounce. It is therefore necessary to keep stops pretty tight on short positions.
For today use 1.2035/1.2100 as an initial guide, with the German IFO, US New Home Sales to provide the economic data but the real action being dominated by Spain and Greece.
