Media reports suggesting that the Spanish government was in talks with EU authorities over a formal bailout request were followed by mixed headlines that set the volatile backdrop. An European Commission spokesman said Spain's government and the EU are in close contact over a package of reforms but denied that the new measures will serve as the basis for an official aid request from the EFSF/ESM.
On net though, European stocks were broadly up, while US opened higher after the recent wave of risk appetite. The yield on benchmark 10-year Spanish government bonds declined.
Euro firmer in choppy trade
EUR/USD has traded in a wide range between 1.2950/1.3050 driven mainly by headlines and large flows. However, bounce attempts have been capped by the 1.3050 zone. It was last up 0.25% at the 1.3000 zone.
"The sense that Spain nearly has all its 'ducks in a row' to request an official bailout has obviously been a benefit to the EUR, but the biggest and sharpest lift for the single currency overnight appeared to be on the back of large flows", said the TD Securities analyst team.
The OMT/QE3 propelled rally of the EUR/USD stalled twice at the 1.3170 zone, as shown by 9/14 and 9/17 failed attempts to follow through that level leaving analysts wondering whether a major top is in place.
EUR/USD is on track to close the week with a net loss after five consecutive gains. However, a weekly close above 1.3000 could be a bullish signal, while many analysts expect gains to be extended if the shared-currency overcomes the 1.3050 level today.
From a technical view, "EUR/USD surges strongly as stocks advance and gold soars above $1780/oz, nearing this year high set by the ends of February at $1790.20", says Valeria Bednarik, chief analyst at FXstreet.com. "Near its daily high set so far at 1.3048, the pair has scope now to continue advancing towards 1.3080 in the short term, if price manages to break above mentioned high. Sellers will regain control only on a clear slide below 1.2980".