A rumor that Spain will ask for 280 billion euros of aid money in order to deal with its debt is running in the past few hours in trade rooms. This is what’s bringing down the Euro.
EUR/USD now trades at 1.3120, very close to the 2010 low and approaching the 1.3080 support line. This line is the place where EUR/USD began the long term rally in 2009, and it’s about to return to this point:
Update May 5th, 13:45 GMT: More trouble sends the Euro much lower. Here are the news about the EUR/USD breakdown.
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Update May 4th, 12:30 GMT: Moody’s and Fitch have issued statements that they will not cut Spain’s credit rating, thus not following S&P. In the meantime, EUR/USD dropped to 1.3085 and is struggling at this point.
Update May 4th 13:45 GMT: EUR/USD collapses! It currently trades at 1.3045, well below the previous support line of 1.3080. Next target – 1.2886, but also watch out for support at the round number of 1.30.
According to Israel’s Globes (Hebrew link), Germany will not be able to back Spain on such a big request, more than two and half times the size of the Greek plan. So, the Euro’s fate is to fall. Due to the Greek debt issues and riots, the Spanish debt problems have escaped the eyes of many analysts, despite its 20% unemployment rate.. Contrary to Greece, Spain is already at the heart of Europe and its huge debt is a danger to the whole Euro zone. Germany was reluctant to help Greece, and cannot aid Spain.
A break below 1.3080 will send the pair towards 1.2886, which is the next line of support. A bounce from current levels will send it towards 1.3267, which is the immediate resistance line.
Stock markets are turning red The Spanish stock market is down 3%, and Wall Street futures are turning negative.
In a post earlier today, Jason Madison gave an alert on an expected EUR/USD breakout.
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