After the results of the Spanish banking sector stress test had show a week ago that it can require from Euros 16 to 25b from the EFSF in the case of central scenario and from 51 to 62 in the case of stronger pressure in adverse scenario and Moody's action of lowering the credit rating of 28 Spanish banks in the beginning of this week, the EU Fin ministers have come out yesterday following a teleconference to say that this sector is in need of an aid from EUR51 to 62b before the waited EU Summit today which is expected to show no hope for Euro Bonds issuance with the current Germane objection.

The EU Fin ministers have seen in this assistance to the Spain a priority for lowering the pressure of the crisis and calming down the markets by bailing out its banking sector which effected negatively on the EU financial markets recently driving up the bond yields of the peripheral countries to its highest levels since the beginning of this year after the working of the first LTRO in last December.

The risks have looked looming around the funding countries this week too by Egan-Jones's decision to lower the credit rating of Germany to A+ from -AA because of the risks of this crisis which threat its banking sector and its holding of bonds of these ailing countries and also the germane governmental contributions in shoring up these countries which effect negatively on its creditability as well by an indirect way while this assistance is still looking convincing in Germany for supporting the European financial markets in the union and the Germane banking sector too.

The single currency has spent most of its trading times yesterday below 1.25 level but it is still near it without breaking its previous supporting level at 1.2408 and by God's will, in the case of falling further breaking it, the pair can meet another supporting point at 1.2408 which can be followed by 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 while the pair way up can be met by resisting level at 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

Kind Regards

FX Market Strategist

Walid Salah El Din