The single currency is still underpinned by the recent successful Spanish auction which could drive its yields down on stronger buying appetite by the investors who are looking for a safe haven and waiting for new action by the ECB to cap these yields from growing up again.

So, the single currency could find it easy to stay again above 1.25 psychological level versus the greenback after the Spanish government sale of 3 months bonds and 6 months bonds had been well- covered driving down the yield of the first to 0.946% from 2.434% in the previous auction and the second to 2.026% from 3.691% from the previous auction and these succeeded auctions came after last week auctions which could drove also down the yield of the 12 month bonds to 3.070% from 3.618% and the yields of the 18 months bonds to 3.335% from 4.242%.while the market is waiting for a final revision by EU of the Spanish banking status as what has been announced by the end of last week before passing the first Euro30 Bln of its Eur100 Bln rescue plan of its banking sector after the ECB has imposed limits of its granted loans by the governmental bonds.

From another side, the greenback came under pressure across the broad following weak US consumer confidence release of August has shown reiterating weakness again in the demand for consuming which moves the economy up by falling to 60.6 while the market was waiting for 66 from 65.4 in July increasing the speculation for a close easing action by the Fed for speeding it up weighing down on the greenback which has been already under pressure since the release of the minutes of the Fed's last meeting in the beginning of this month helping the pair to have a place above 1.25 last week.

Now, the markets will be waiting by God's will, for new clues about the next Fed's action when the Fed's Chief to speak from Jackson Hole by the end of this week eyeing on the coming US economic figures specially what are new about the labor market which always takes the care of the Fed as the recent data about it have shown kind improving with the rising of US non-farm payrolls to 163k in July from 64k in June showing light pressure on the Fed to take such awaited easing step of QE3 soon giving support to the greenback and saving it from being under strong constant pressure in the same time.

But now with this recent stronger tone which has been sent out from the Fed's governors, the market expectation of QE3 can increase again with having just non-farm payrolls numbers below 100k as they have been in the previous 3 months to July as warrant levels to a close new easing action by the Fed instead of waiting for having negative numbers again as most expectations were referring by these minutes which changed by its release the market sentiment from last week till now.

God willing, The market will be closely watching today also the release of US Q2 GDP which is expected to show annualized growing 1.7% after the preliminary reading came at 1.5% as the slowest pace of growth since the Q2 of 2011 while the single currency is expected to meet resistance again at 1.2587 whereas it failed to surpass last week and this can be followed by another resisting level at 1.2693 before 1.2748 which has been reached after the recent parliament elections in Greece in last June while easing down back again can be met with supporting levels at 1.2464, 1.24., 1.2241, 1.2134 before 1.2042 which could stave off the pair falling last month and in the case of falling below it, this can open the way for testing 1.20 psychological level which can be followed by reaching 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010

Kind Regards

FX Market Strategist

Walid Salah El Din