The Dollar gained a little versus the Euro following a report which suggested that a German bank may issue more shares. This action could mean a capitalization problem but the mild reaction suggests it may not be a major problem. This is also not a fresh development because recapitalization was mentioned in the European stress test report.

 

While recapitalization may not be that big of an issue, this story combined with chatter earlier in the week about banks carrying risky sovereign debt, could lead to the start of a liquidation break by nervous longs. In addition, aggressive bears may begin to smell a little blood in the market which may lead them to press the short side a bit.

 

Technically, the EUR USD remains in an uptrend, but today’s lower close brought it closer to testing a pair of swing bottoms at 1.2625 and 1.2587. A violation of these two levels will turn the main trend down on the daily chart.