EUR/USD: 1.2920The Euro remained firm today on expectations that Spain is about to ask for a bailout from the EU, despite the fact that Germany has said that it should hold off, at least until the next EU summit on 18 October. Further adding to the confusion was a statement by the PM Rajoy that he would not be asking for any assistance this week.
The market continues to have one eye on Moody's who are due to review Spain's debt rating at any time, with a good chance of it being downgraded to junk status. Today's statement from Moody's suggesting that the Spanish banking system will need up to Eur105 bio in order to stay afloat, as opposed to the Eur 53 bio shortfall reported in the stress tests would appear to suggest that they are heading in that direction.
Elsewhere today, EU PPI rose 2.7%yoy in August against expectation of 2.6% and had little effect. Focus will now begin to turn to Thursdays ECB meeting, where no change is expected but interest will be on the tone of the Press Conference.
Over in Greece the Troika are looking to see where Greece could make another Eur 2bio order be eligible to receive the next tranche of the bailout package.
From a technical point of view, the Euro continues to recover slowly from its recent 1.2802 low, and today reached a high of 1.2967 before a mild retreat to current levels as the equity markets turned a little lower.
The shorter term charts remain somewhat mixed and I suspect that we are going to continue to drift around rather aimlessly - possibly until the ECB meeting.
Above today's 1.2967 high, the 50% pivot of 1.3171/1.2802 currently lies at 1.2986 and the 61.8% Fibo target is at 1.3029. The 4 hour charts are pointing mildly higher and so a slow drift to test these could eventuate.
A return lower would see some short term bids at 1.2900 and then at 1.2865 and 1.2840 ahead of the 1.2802 recent low.
The Euro should remain capped at around 1.3000 for now and with the dailies still pointing mildly lower it looks as though we are in for a bit more of the same and therefore 1.2865/1.3000 should cover it.
Today is a German Bank holiday which will limit interest in the European session.
Elsewhere:
German Unity Day holiday, German Services PMI, EU Retail Sales, US ADP Employment, ISM non -mfg PMI.
