FXstreet.com (Barcelona) - According to Jane Foley, senior FX strategist at Rabobank, for now, there is solid interest in buying dips in EUR/USD on the back of the ECB’s commitment to putting in place a fully effective backstop in the Eurozone to guard against a deterioration of the crisis effects. "However, the Eurozone crisis still has the capacity to throw bad news at the market," she noted and added: "After all, Spain has yet to ask for aid." Foley also explained that politically there will be a high cost for the Spanish government if it opens its doors to IMF inspectors. At the same time ECB President Draghi was last week adamant that strict conditions be attached to any bail-out and that the IMF play a part in monitoring process. October could be a testing time for Spain in so far as the government then faces bond redemptions amounting to around EUR20 bln.
Last week’s Spanish bond auction went well but this was on investors’ belief that Spain will at some point request aid via the ECB’s bond buying scheme. "The longer Spain delays a formal request for aid the higher yields could go at successive actions and the more negative implications for the EUR. At this point we are reluctant to put our end year target for EUR/USD above the 1.2500 level, though in the near-term we remain buyers of dips. The 200 days sma at EUR/USD1.2835 is likely to pose as decent near-term resistance and a break above could stimulate near-tern upside despite overbought momentum." Foley concluded.