The single currency has started the week trading below 1.255 versus the greenback after it has been stable around this level following its falling last Thursday after Moody's decision of lowering the credit rating of 15 of the top global financial institutions including Barclays and Citigroup.

The single currency has come also under pressure last Thursday following the release of Philadelphia June manufacturing index which has fallen to -16.6 from -5.8 while the market was waiting for rising to zero to add more pressure on the equities market which have been actually depressed by worries about the debt crisis in EU with the current global slow pace of growth.

The single currency has come also under pressure from another side following the announcement of the Spanish banking sector stress test which have shown that it can require from Euros 16 to 25b in the case of central scenario and from 51 to 62 in the case of stronger collapse in adverse scenario but The EFSF Ceo Regling has tried to come out calling down the markets saying that the plan is able to give Spain up to 10% of its GDP to avoid exposure to the financial market can increase put more weight on it driving up its cost of borrowing and it is well known while Spain is planning for selling about Euro82b of bonds this year. EU's Rehn has said also that the rescue plan for Spain will be prepared targeting its banking and financial sectors and it is expected to be proceeded next 9th of July to drive down the yield of 10 year Spanish governmental bonds to 6.7% by the end of last week after it had been above the 7% level.

By God's will, The single currency is waiting now for the EU summit which is expected to discuss new terms for reaching stronger EU banking and financial union which can open the way for issuance of the EU bond which is still refused by Germany. The waited EU summit is expected to discuss too using the EFSF funds for buying directly peripheral bonds of the indebted ailing governments inside the Euro zone.

God willing, in the case of rising, the single currency can meet resisting level at 1.2748 again whereas it failed to continue rising versus the greenback in the beginning of last week and crossing above it can be met by a higher resistance at 1.2822 before the psychological level at 1.30 which its breaking can open the way for more resisting levels at 1.3063, 1.3180 and this can be followed by 1.3281 which its breaking can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top and in the case of breaking 1.3489 while the way down can be met by supporting levels now at 1.2518, 1.2433, 1.2408, 1.2357 before 1.2286 which could hold the pair decent after US non-farm Payrolls release of May and the breaking of it can lead again to 1.2151 which its breaking can open the way for 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010 which drove the pair later to reach 1.4939 on 4th of May 2011 whereas the pair has managed to ease back again.

Kind Regards

FX Market Strategist

Walid Salah El Din