The euro slid against the dollar late in the New York session on Tuesday, pressured by a late fall in stocks and commodities as investors grew cautious about developments in debt-plagued Spain.
Spain, in no rush to seek a bailout, prepared for a new round of austerity measures in the 2013 budget but was met Tuesday by protesters who clashed with police in the country's capital.
Spanish Prime Minister Mariano Rajoy has already passed spending cuts and tax hikes worth slightly more than 60 billion euros over the next two years, but half-year figures show the 2012 deficit target slipping from view as tax income forecasts will not be hit due to economic contraction.
Tens of thousands of protestors clashed with police in Madrid today, tearing down barriers blocking access to Parliament and prompting the firing of rubber bullets. There’s no easy way out of this mess and this social unrest will only make the tough decisions even tougher. On the one hand, the financial community won’t let up on Spain until they succumb to a sovereign bailout,
At the time of writing, EUR/USD trades around the 1.2900 mark. If the bear pressure does continue into Wednesday’s Asia-Pacific session, support is noted at 1.2854 (200-day EMA), then 1.2822 (May 21 high) and 1.2740 (38.2%, 1.2041/1.3170 rise). Upside rallies may find immediate resistance at 1.2918 (Sep 20 low), then 1.2955 (Sep 21 low).
From a technical standpoint, “EUR/USD is doing a lot of heavy consolidation near 1.2900 and this level will become the next pivot I feel,Hedge funds are again selling EUR ahead of the Spanish risk events on Thursday but some of the bigger banks remain exceedingly bullish for moves to 1.35+.”
I’d suggest range trading here until the next trend becomes clearer, with 1.2860/1.2960 likely to cover all eventualities.”
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