The single currency is still keeping its retreating pace versus the greenback trading below 1.285 in the beginning of the US session under the pressure of the second day of violent demonstrations in Spain against the austerities measures ahead of the waited parliament elections can be sooner than later looking the main reason of delaying the governmental official request for bailing out Spain.
The Spanish bonds yields surged again in the secondary market and the risk appetite came under pressure pushing up the greenback across the broad from another side with emerging worries about the debt crisis in Europe and the bad economic conditions in Spain which can be transferred to other debt ailing countries.
While the market focusing on Spain can be extended weighing down on the market sentiment and the euros as European commission's spokesman has announced earlier this week that it is not soon to deliver the first tranche of €100 billions of bailing out its banking sector as the European Commission will make its own analysis of this sector next month following the Spanish banking stress test results this month as the European authorization was to release up to 30 billion euros of this plan from the EFSF or later from the ESM once the Spanish government finished its revision of its banking sector to be recapitalized.
while Spain is still sending out very weak signs of its economy which has contracted y/y by 1.3% in the second quarter while the market was waiting for shrinking by just 1% after dropping by 0.6% in the first quarter of this year with rising of its unemployment rate reaching 25% with strong increasing of its unemployment change by 38.2k in August.
From another side the single currency came under pressure as the German central bank head and the ECB member Weidmann has chosen to not waste a chance of criticizing the ECB' OMT plan saying that he is not the only to has doubt about its efficiency. From another side, The ECB President Draghi has mentioned that he has enormous respect for the Bundesbank and many ECB members which are having the same worries but this was the chosen way for calming down the markets by the ECB which has seen in its decision of buying EU governmental bond plan a bridge for a more stable future and he did not forget too to refer to the governmental important role in the face of the crisis.
By God's will, in the case of easing back giving back more of its recent gains which reached 1.3170 in the beginning of last week, EURUSD can be met with another supporting level at 1.2749 which can be followed by 1.2605 which is the 50% Fibonacci retracement of the rising from 1.2041 to 1.3170 before 1.2464 again while rising again from here can be faced 1.30 psychological level before more resisting levels at 1.3047, 1.318 which could hold in the face of its recent rally while breaking it can open the door for 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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