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Euro approaches the European trade having almost entirely erased yesterday's gains after it challenged higher ground against the U.S. dollar, all occurring within the context of very familiar range levels. Yesterday's contained buying interest saw the spot rate rise to a 1.2966 high before Spanish PM Rajoy threw cold water into any immediate bailout expectations, which set the stage for longs running to the exits.

What is the potential bailout time frame? According to Divyang Shah, Editor at IFR Markets Team, "the next dateline for a potential bailout request will be the EU summit on October 18-19, but one suspects that Rajoy will wait until after the regional elections in Galicia on October 21 are out of the way before pulling the trigger, if indeed he deems that it necessary to pull the trigger at all."

Weighing on the euro were also reports that China Investment Corp officials will not be investing in periphery debt until fundamental issues are resolved. Jin Liqun, chairman of the supervisory board of the China Investment Corporation (CIC), said "There will be no solution, until there is no way out," he told Reuters in an interview.

Forward-looking, and since the bailout for Spain appears to be still some weeks away, the investment community will be keeping an eye on first-tier risk headlines coming out of Greece, where authorities are negotiating with the Troika additional cuts before the next tranche of funds may be released, and also from Moody's rating agency, still conducting an assessment on the Spanish 2013 budget, ECB OMT program and bank recapitalization plans. The decision may come anytime this month.

EUR/USD - Range trading conditions to stay for now

The disappointment on the latest Spain-bailout front, together with lack of any other potential EUR-positive stories, is likely to be factored into the EUR/USD through "conservative" bets ahead of a slew of important data on both sides of the pond, therefore today's activity may be a case of the calm before the storm.

Last topside 1.2966 threat was a failure and sellers have been stepping in to play the game of "range-trading," with odds high of range persisting until tomorrow's ECB and Friday's NFP. Ahead of these high-volatile events, big institutions tend to re-adjust their positions and limited order flows are the norm.

Technicals are also reflecting the case for range-trading conditions today, with "the hourly chart showing indicators stand in neutral territory, showing no actual strength either side of the board" comments Valeria Bednarik, Chief Analyst at FXstreet.com; "In the 4 hours chart the technical outlook is also neutral, as the pair has been trapped in a 160 pips range for the past 5 days. The pair lacks trend at the time being," she adds.

Sean Lee, Founder at FXWW, also supports EUR/USD range trading mode for the time being, expecting to stay that way whilst negative EZ-debt headlines are missing; "EUR crosses are looking quite strong with support nearby in EUR/CHF, EUR/GBP in stop-loss hunting mode, and both EUR/JPY and EUR/AUD turning bullish. I'd expect 1.2825/1.3000 to cover all eventualities for the next few sessions," Mr. Lee notes.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: EUR/USD - Range To Persist As Rajoy Kills Buyers' Fun