EUR/USD: 1.2970Once again the Euro remains under pressure, with violent unrest in Spain and a general strike in Greece ensuring that any upside remained limited ahead of the Spanish budget today that will see further spending cuts. Comments from the Spanish PM Raja, that if borrowing costs remain too high, he will be heading straight to the EU for assistance did not help the Euro and 10 year Spanish yields duly headed back above 6%. Further pressure came from the statement from the Bank of Spain today that Q3 GDP is expected to fall sharply. Equity markets fared no better, with the Ibex in Madrid closing down 4%, the Dax -2%, CAC -2.8% and the ESTOX50 -2.72%.
Technically not too much has changed and the Euro remains within the descending channel and above short term support at 1.2815, having today seen a low of 1.2835 (50% pivot of 1.2498/1.3171) . The longer term charts are beginning to accelerate to the downside and a breach of 1.2815, where large stops are said to be placed, would suggest further declines towards the channel base at 1.2755 that currently coincides with the 61.8% support of 1.2498/1.3171), below which lies 1.2741 (38.2% of 1.2042/1.3171).
On the topside, 1.2900 is the first level to watch, above which the top of the channel is now at 1.2930. Above that is 1.2955 (23.6% of 1.3171/1.2042) and then Mondays 1.2970 high, followed by 1.2996 (38.2%). We then move up to Fridays 1.3047 high and 1.3084 (19 Aug high), and then the recent rally high of 1.3171 which looks likely to remain untroubled in the days to come.
Economic data today includes German Unemployment and US Durable Goods and GDP so it could get quite lively later on, but the focus looks to remain on Spain.
Use 1.2800/1.2880 as an initial guide, with the bias looking to remain to the downside but with price action likely to be pretty choppy. The short term charts are actually showing very mild positive momentum and so a drift towards 1.2900 is possible before weakness once again sets in.
