EURUSD Movement
For the 24 hours to 23:00 GMT, EUR declined 0.14% against the USD and closed at 1.2881, after the Bank of Spain reported that Spain’s gross domestic product would probably fall at a “significant rate” in the third quarter of 2012.
Adding to the negative tone, Spain’s 10-year bonds borrowing costs surged past 6%, a level considered unsustainable in the long run, after the region of Catalonia announced an early election in November.
Meanwhile, the ratings agency, Fitch, warned that the Spanish regions must quickly do more to cut their budget deficits, however added that their situation had improved sharply in the first half of 2012.
Additionally, Greece’s two biggest unions held a general strike today to protest at a new round of austerity demanded by EU and IMF lenders, contributing to negative sentiment towards the Euro.
Yesterday, the European Central Bank (ECB) Executive Board Member, Joerg Asmussen, stated that the central bank would not take part in any potential debt restructuring of Greece, citing this would constitute state financing, which is forbidden.
Investors received some relief, after Italy’s Finance Minister, Vittorio Grilli, denied that the country would need a bailout from the European Union, adding Rome was managing its reforms effectively without outside help.
On the economic front, leading index in the Euro-zone climbed 0.6% (MoM) in August to 105.3, while the coincident economic index rose 0.1% (MoM) to 102.2 in August. Meanwhile, the German consumer price index rose 2.0% (YoY) in September. Additionally, in France, the number of registered jobseekers increased from 23,900 to 3,011,000 in August. Consumer confidence in France eased marginally to 85.0 in September, compared to 86.0 in August. In Italy, retail sales on a seasonally adjusted basis fell 0.2% (MoM) in July, compared to a 0.4% rise in June.
In the Asian session, at GMT0300, the pair is trading at 1.2878, with the EUR trading marginally lower from yesterday’s close.
The pair is expected to find support at 1.2840, and a fall through could take it to the next support level of 1.2803. The pair is expected to find its first resistance at 1.2911, and a rise through could take it to the next resistance level of 1.2944.
Trading trends in the pair today are expected to be determined by the release of German unemployment rate and Euro-zone consumer confidence, industrial confidence and economic confidence data. Investors would also closely track news from Spain, as the nation would announce a series of economic reforms and a tight 2013 budget today, aiming to avoid the political humiliation of having Brussels impose conditions on a request for an international bailout.
The currency pair is trading between its 20 Hr and 50 Hr moving averages.
