EUR/USD Outlook Remains Bearish

By TraderVox.com

Tradervox (Dublin) – Last week saw the euro/dollar pair, close at lower level due to Spanish concerns. However, these concerns have continued to haunt the pair to this week with the pair sliding lower. The eurozone is on the spotlight again with pressure on Spain growing. The country is currently hosting EU inspectors and Italian official are putting on more pressure. Further, the market has pushed Spanish yields higher and the ECB has hinted on reigniting its bond buying scheme, but LTROs are expected. In the US things are better with chances of the third round or quantitative easing diminishing.

The EUR/USD cross registered a one-month low in the Asian session as news of the Spanish banks borrowing a record amount from the ECB hit the market. The situation in Spain continues to worsen with ten-year yields soaring to 6.0 percent. However, the pair has recovered in the European session trading at 1.3032 as German economic sentiment were above the market forecast of 19.7 percent posting a reading of 23.4. The market is expecting the Current Account report today which is projected to drop from 4.5 billion euros to 4.3 billion euros. The Consumer Confidence, the German PPI and German Ifo Business climate are other reports that are expected to affect the pair further this week.

The EUR/USD cross is expected o continue on a bearish trend through to next week as the eurozone debt crisis continues. Analysts are expecting the situation in Spain to deteriorate and the market to put more attention to the regions debt crisis. Traders will be looking for safe haven currencies like the yen, greenback and the Swiss franc. Traders will also find some safety in the sterling pound as positive reports from the region builds investor confidence.

While economic outlook for the US does not look too good either, a weakening dollar and an increase in concerns about a QE3 will be prompted by global economy especially the Chinese economic slowdown. Bad economic outlook for the US and China, which are the largest world economies, means a greater risk aversion which is not supportive of the euro. As such, euro/dollar remains bearish.

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