FXstreet.com (Barcelona) - The Euro will be opening the London session in a rather non-comforting position, as it trades below USD 1.2820, a level which, since Sept 11, marked the southern boundaries of a torturous 7-week range. Last Friday's upbeat NFP unleashed a bearish party that up until now, still keeps on rolling.
The recent acceleration in EUR/USD weakness comes as the clock continues to tick against Greece, with a much-needed €31.5 bln disbursement to pay off its debts still unsure to be delivered, thus again raising the odds of a possible 'default.' Greece could offer some headlines today, as Parliament considers austerity measures to be voted Wednesday.
As per Spain, the lack of urgency from Prime Minister Mariano Rajoy to apply for a bailout undoubtedly weighs in the EUR outlook, which seems will have to rely on general 'risk-on' sentiment or USD demerits to turn this weakening pattern around.
London's session ahead will center on services PMI figures for EUR related data, starting with Spain at 08:13 GMT, followed 30 minutes later by Italy, France another 5 minutes after, Germany at 08:53 GMT, and the EU 5 minutes later. Then will come EU PPI at 10:00 GMT, and Germany factory orders at 11:00 GMT, all of which will count for little, given that the U.S. presidential elections will be playing in the background all Tuesday long until results start to come through late NY time.
A massive weight on the EUR fall on Monday, as Mitul Kotecha, Founder at Econometer notes, "was the fact that Germany 2 year bond yields turned negative, leading a widening U.S. yield advantage, and in turn a weaker EUR/USD."
The analyst suggests that since the correlation between 2 year U.S. - German yield differentials is very high, "this implies that the EUR will struggle below its 200 day moving average around 1.2828 until German yields push higher" Mr. Kotecha adds.
According to Valeria Bednarik, in-house Chief Analyst, for the short term, "the EUR/USD remains capped to the upside by the 1.2800 level, with the hourly chart showing a negative technical stance, with immediate support at 1.2765 daily low. If the level gives up, the 1.2740 area is next, while if below this, bears will take full control of the pair."
To the upside, nearest term resistance shows at recent session highs of 1.2803, as Valeria highlights, followed by Monday's Asian session/Friday's lows at 1.2815/9, and Monday's high at 1.2842.