Spain Focus As Bank Stress Tests Ahead

A quiet end to the week saw the EUR/USD pivot the 1.3000 level with a lack of fresh direction. The European session saw the day highs for stocks and risk appetite but this was unwound in the US session as profit takers took control. Weekend news focused on Spanish bailout plans and Banking stress tests due for release this Thursday. Looking ahead, no data Monday.

The Euro (EUR)
Talk on Friday that Spain was planning a bailout helped lift the EUR/USD to day highs before a denial from German’s Schaeuble that Spain even needed a bailout. Another reason for the drop in the US session was talk the Swiss national bank was selling Euros from its recent EUR/CHF intervention.

The Sterling (GBP)
Managed fresh year highs above 1.6300 during the European session but reversed sharply in the US session dragged down by weaker stocks and euro. The outlook is for more gains but there is still some event risk from Spain this week and Greece Troika report. Looking ahead, September IFO German Business Climate forecast at 102.5 vs. 102.3 previously.

The Japanese Yen (JPY)
The USD/JPY is finding support at Y78 and is bouncing along waiting for a further catalyst. The weak USD from the QE3 news is pressuring the downside but jawboning from the Japanese Authorities is growing louder and the BOJ itself has loosened monetary policy. The race to have the weakest currency to spur exports is being played by all the large economies including China, Japan and the US.

Australian Dollar (AUD)
The AUD/USD is struggling to maintain the positive momentum from the previous week and we found ourselves on the back foot for most of last week and we finished offered at 1.0450 after failing at 1.0500. The pro risk rally in US stocks and commodities is helping support the aussie but the sharp slowdown in China is giving plenty of reasons to sell from these levels.

Oil And Gold (XAU)
Gold hit fresh highs above $1785 before reversing sharply on rumors of increased margin requirements from the CME Gold exchange. These have since been dismissed but the precious metal fell $20oz and has opened weak in Asia Monday. OIL/USD finished roughly unchanged as a small rally was reversed back to $92.50 support.

Pairs To Watch
EUR/USD: Failed at 1.3000, further pullback ahead?

AUD/USD: Failed at 1.0500, to test for support now?

TECHNICAL COMMENTARY