Euro bearish views dominant
Some analysts, including in-house expert Valeria Bednarik, still observe that while mid term the downleg still qualifies as corrective, indications are "there is still not much buying interest around" Valeria notes.
As the picture stands, scrutiny through inter-banking commentaries suggests large institutions continue to like selling into strength for now. Wels Fargo or RBS views portray the bearish sentiment currently established in the Euro, expecting the corrective action to last a few more days.
There are other banking institutions like Westpac or Rabobank still maintaining 'patiently' buy dip views in their daily technical reports.
In the London session, sellers are reportedly tipped around 1.2890 - coincidentally Asian high - with sizeable stops eyed once price can make it through a high of 1.2920. If instead, risk-off trading settles in Europe today, this may ensue another attempt at 1.2835/40 stops held yesterday ahead of 21 & 200 day MA, which come combined with the Sep 12 lows.
Spain the main focus
For today, further nerves-driven moves may be expected, with EU risk headlines - delays in Spanish bailout, impasse on fiscal union agreements - to potentially still benefit the downside.
The rationale behind the Euro heaviness is largely driven by the stubbornness of Spain to request the rescue, with unnerved investors being forced to blow Spanish bonds back wider - currently back above 6% - and subsequently press the Euro lower. There is a say that "if the mountain won't come to Muhammad then Muhammad must go to the mountain."
While market may still wary of selling more Euros ahead of the Spanish aid request, latest WSJ headlines quoting Rajoy, suggest he will hold out any assistance until yields go higher, thus at own sellers peril, looks like each short term EUR strength still presents opportunities short the pair.
Asked on the bailout prospects, Mr Rajoy said, "At the moment, I cannot tell you." He said the government has to first work out whether or nor the conditions attached are "reasonable". He added that if yields were "too high for too long, I can assure you 100 per cent that I would ask for this bailout."
As stated by Desmond Supple and Guy Mandy, Fixed Income Researchers at Nomura; "If Spain continues to delay requesting aid, we fear that the 10yr part of the curve could see yields rise closer to 7%." NAB tends to agree with Nomura: "The bond market has already started voting with it feet here, and risks is that prevarication will see Spanish yields spike back towards the mid-July highs of 7.5%." Inevitably, if yields in the periphery go up, Euro is likely to suffer.
Additionally, today we should also get Spanish planned structural reform and budget measures "which can form the basis for the reforms likely to be demanded by Spain’s EU partners and accepted by the ECB as the conditions for secondary market purchases of Spanish debt" Analysts at NAB noted.
Another risk event Euro buyers may be facing in today's trading is, as NAB Strategists commented in Asia, "the risk that Moody’s may act to slash Spain’s credit rating to junk."