Spain Avoids Downgrade, Boosts Euro
?? Fundamentals
The Euro has been stronger over the past two sessions, as Spain has avoided a ratings downgrade. Many were expecting sovereign debt from the embattled nation to receive a downgrade from Moody’s, so the news sparked heavy speculative buying/short covering in the currency.Spain is also expected to make a formal request for aid from the European Central Bank (“ECB”) and International Monetary Fund (“IMF”), which many hope will help keep the country solvent.
Support for the proposed European banking union, which would place banks under the oversight of the ECB, has picked up steam, which can be seen as positive for the Euro. However, European Union (“EU”) nations are squabbling over the costs of the agency and how the financial burden of failed banks will be split-up, making the formation no slam-dunk. In addition to the costs, many skeptics are concerned that the ECB may not be given enough oversight, and even if the Central Bank was given enough authority, many question how effective such an organization would be in identifying risks.
?? Technical Notes
Turning to the chart, we see that the December Euro contract jumped and formed a gap between the October 16th and 17th trade dates. Prices failed to advance beyond the relative high close of 1.3143 thus far. Breaking through this relatively minor resistance level would suggest prices could approach the 1.3250 mark.
The strong move over the past two sessions does show a breakout from a pennant on the daily chart, suggesting a continuation of the uptrend that began in July, but which stalled over the past several weeks. The RSI is currently overbought, which could cool some of the market momentum.
——————————————————————————————————–
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the “”Disclosure Statement for Futures and Options”” prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.