Spanish Prime Minister Mariano Rajoy said in an interview that he was ready to seek a bailout if its debt financing costs stayed too high for too long. Slave of his own words, Rajoy saw Spanish 10-year borrowing costs rising above 6% and global stocks slumping.
EUR/USD at 2-week lows, which is euro's near-term fortune?
The EUR/USD remains in one-week downtrend off 1.3171, 17 Sep high, and keeps on printing lower lows and lower highs on daily basis. With all that, analysts were left wondering whether a top is in place at the 1.3170 area, or if it is a merely corrective movement ahead of another leg higher. EUR/USD was last down 0.5% at the 1.2840 area, having touched a low of 1.2837.
There is no consensus among analysts about the long-term fate of the cross as the downside is being limited by Fed's aggressive stance and speculation that QE3 could last until 2014. However, in the nearer-term the EUR/USD seems to have scope for a deeper correction.
The TD Securities team considers that the short-term bear-trend appears intact. "While headlines should continue to make for choppy price action the recent bear trend appears well intact, and the next target looks to be near the low 1.28 area".
According to Commerzbank, EUR/USD could actually have topped last week. "EUR/USD is trading below the cloud on the 240 minute chart for the first time since mid August – which suggests the downside phase short term remains in force. The Elliott wave count on the daily chart is implying that we will see a deeper pullback to 1.2827/1.2700(200 day ma), prior to a reattempt on the topside", says Commerzbank. "However we are beginning to suspect that the market has in fact topped recently at 1.3177 and the decline will extend back to the 2 month uptrend. This is currently located at 1.2624".
Wells Fargo team expects the corrective and consolidative action in the currency markets to continue in the coming days, with European events to remain the focus. "In particular, later this week the Spanish government will approve the 2013 Budget and present it to the Parliament, while the results of the bank stress tests are also due", they comment. "The exact details of the Spanish events will clearly dictate the euro's near-term fortunes, though our bias heading into this weekend is for a continued – albeit mild – negative bias for the euro and most foreign currencies".
Meanwhile, UBS analysts keep a neutral short-term bias for the EUR/USD but note that a break below 1.2837 would suggest scope for deeper correction to 1.2758.