FXstreet.com (San Francisco) - The euro declined for the first
time in five weeks against its U.S. counterpart as concern
increased that the global economy may be slowing, depressing
investor appetite for risk.
The path of least resistance for EUR/USD in the short to
medium-term appears to have shifted to the downside as price pulls
back from a recent 4-month high, and as the Daily RSI at 66 crosses
back below the overbought mark and leaves scope for a deeper
downward correction in the week ahead.
From a technical standpoint, "EUR/USD closed the week back below
1.3000 which is something of a psychological victory for the
bears," observes Sean Lee, founder of FXWW. "Technical resistance
is now very strong at 1.3070/80 which is the double-top neckline
and a 61.8% retracement level and selling rallies is preferred
whilst this level caps. Obvious intraday support lies at 1.2915,
which was last week's low."
The political spotlight in Europe remains on Spain, as the nation
is reportedly on the verge formally asking for assistance. "We do
not anticipate a formal request by Spain until mid-October at the
earliest," says Marc Chandler, Global Head of Currency Strategy at
Brown Brothers Harriman. "At the end of next week, the three month
review of Spain's financial system is expected to be completed with
the outcome being a clearer understanding of the banking system's
Mr. Chandler adds: "Spanish officials insist that the 100 bln euro
backstop already granted will prove more than sufficient. There is
some desire to use the 'excess' for other purposes, but this will
Technically speaking, he notes: "While the technical tone has
weakened, we still do not see a strong sell signal for short-term
participants. Medium term participants may reduce euro exposure or
short dollar hedges into euro strength. A move now back above
$1.3080 would could see another cent advance."