While main attention continues on whether Spain will ask for an official bailout from the EFSF/ESM that would trigger ECB bond-buying in the secondary market, an EU/IMF report into whether Greece's debt is manageable, now looks set to be delayed until after Nov 6.
It's a light data week ahead, with the highlights outside of Spanish and France fiscal data at the end of the week being US durable goods orders (Thurs), Eurozone flash CPI (Fri).
EUR/USD struggles to hold 1.2900, is this move merely corrective?
After Friday's limited bounce, the euro resumed its decline against the dollar on Monday, falling briefly below the 1.2900 mark to hit an 11-day low of 1.2890. However, analysts remain split on whether this is a merely corrective movement or if a top is in place at 1.3171, where the pair peaked last week.
"The days ahead will help clarify whether the US dollar's somewhat firmer tone last week was simply corrective in nature, before a new leg lower, or the carving out of a bottom of a downtrend that began in June against most of the major currencies and July for the euro", says Marc Chandler, analyst at BBH.
The BBH team notes that even though the technical tone has weakened, they still do not see a strong sell signal for short-term participants. "Medium term participants may reduce euro exposure or short dollar hedges into euro strength. A move now back above $1.3080 would/could see another cent advance".
Overall, Wells Fargo analysts still view the current FX price action as a pause and consolidation after sizeable gains for the euro and other foreign currencies earlier this month. "The next important catalyst for FX markets could be an official request for financial aid by the Spanish government in the coming weeks, which, in our view, should lead to some renewed euro gains and broader US dollar weakness", they say.
Meanwhile, Valeria Bednarik, chief analyst at FXstreet.com points out that the short term bearish momentum, is still temporal and seems too early to talk about a roof and a reversal. According the Bednarik, only a break below the 38.2% retracement of latest bullish leg, that stands around 1.2750, will make the bullish trend hesitate.