Fundamental Analysis For EUR/USD

By TraderVox.com

Tradervox.com (Dublin) – The euro/dollar cross trading within range last week, but closed lower as global economic sentiment deteriorated. Spain is under pressure to request for bailout but it does not look likely until after October 21. With the S&P downgrade, Spain may be forced to request for bailout earlier if the Spanish yields surge higher. Troubles in Europe have been increased by the IMF forecasts and the comments by Angela Merkel’s advisor, saying that Germany is actually thinking about its banks when lending to other countries in the region.

The market is now focusing on the Spanish ten-year bond auction to be held at 0900hrs on Tuesday. While the previous auction saw an improvement in bond yields, dropping to 5.67 percent from 6.65 percent, the mood has changed since then and Spain might be forced to pay higher borrowing cost. If the cost is too high, Spain may request for bailout earlier than predicted. The report from Germany on it economic sentiment will be released on Tuesday at 0900hrs. There is an expectation of improvement in the index but its effect will likely be minimal if the Spanish auction does not go well. The market is not upbeat about the euro area, and the economic sentiment is expected to be at -3.8 points for September.

The EU Summit meeting which will be held on Thursday and Friday will be a major event which is expected to be positive for the euro. The main agenda will be Greece and Spain and the meeting is likely to come up with positive results for the two countries. Spain is seen holding from requesting for bailout as it waits for the decision from this meeting. If the decision is not favorable for Spain, the government might be forced to request for bailout which will add investor confidence in the region. The market predicts that Spanish bailout request is likely to come after the regional elections to be held on Sunday October 21.

The euro-dollar pair may trade within range, closing the week on the higher side.

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