While the comments which are coming from the EU Summit are showing that there is no banking recapitalization before the banking supervisory which is outlined to be started later in 2013 until now and not in the beginning of it as the Germans are trying to show, the single currency has managed to ease back further with no new news out of the EU Council meeting can refer to a change of the Spanish stance which is looking solider than before denying the need for bailing its banking sector right now and the single currency is trying now hardly to close the week above 1.30 psychological level versus the greenback which is still trying to add more gains in the beginning of the US session after its ability to hold yesterday gains across the broad with persisting of the risk aversion sentiment which could contain the market sentiment following yesterday drop of google stock by nearly 8% because of its unexpected weak Q3 earning report to drive its stock share of profits down to 9.03$ from 10.12$ in the second quarter while the market was waiting for rising to 10.66$.
From the other side, the hopes for Spanish asking for bailing out its banking sector are still diminishing while S&P credit rating agency is still raining Spain by its downgrading by lowering 5 of its districts from a notch to 2 notches this week too after putting its credit rating a notch above junk last week at BBB- as the Spanish government is still looking laying on its recent better than expected Banking stress tests results which came better than expected showing the need for only 59.5b euro for recapitalizing its banking sector showing no serious need for rushing to this request and encouraged by the recent falling of its bonds yields in the secondary market and also after this week better than expected auctions results of its issuance of 12 months, 18 months, 3 years and also 4 years as they are all have been well covered at a lower yields than their previous actions Thanks to the ECB announcement of its OMT plan last month.
But this EU Bonds market improving stance can turn down easily anytime as long as there is no official request for aiding Spain to open the closed door in front of direct ECB intervention for lowering its bond yields in the adverse case, despite its FM recent confession that Spain is not in need for bailing out but it can be in need for the ECB intervention for driving down its bonds yields while it is obvious to the investors that this can not be done without asking the recent deployed ESM assistance first while its economic performance is not at that good shape to underpin its government for long time while it is in need for easier credit conditions after shrinking y/y by 1.3% in the second quarter and by 0.6% in the first quarter of this year facing continued rising of the unemployment rate approaches 25% with 79.6k more came out of the working forces in September after losing 38.2k in August to have 4.705m unemployed workers.
By God's will, EURUSD can meet now support at 1.30 psychological level and the breaking of it can open the door for another supporting level at 1.2881 which can be followed by 1.2823 which supported it before to the current level after falling from 1.307 and this can be followed by 1.2803 which could support it top after falling from 1.2870 last month. So, the pair can be now under technical pressure after forming its second lower top at 1.3138 this week and falling to stand above 1.2803 as a neckline supporting level can open the door for meeting other supporting levels at 1.2753 and 1.2740 whereas the 38.2% Fibonacci retracement of the rising from 1.2041 to 1.3170 before 1.2464 again which meets also the 61.8% Fibonacci retracement of this same rising while creeping up again from here can be faced by 1.3138 before its recent top at 1.317 which its breaking can open the door for meeting higher resisting levels at 1.3282.1.3384 before 1.3485 again whereas it has formed its lower high on 24th of last Feb after forming a bottom at 1.2623 on 13th Jan of this year which came as an end of a down channel has started from 1.4245 on 26th of last October 2011.
FX Market Strategist
Walid Salah El Din
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