The Eurozone is facing a lot of problems coming from Spain, Greece and some leaders quoting divergences in opinion. The debt costs in Spain have risen around 31 bps to break above the 6.0% level and close the day at 6.08% for the 10Y bonds, as a second night of violent protests loomed amid sparring over the police response to clashes in Madrid. Protesters started gathering in Madrid for a second day while workers staged a general strike in Athens to protest austerity measures at ground zero of Europe’s financial crisis. Police fired tear gas near the Greek Parliament after demonstrators threw fire bombs. Rajoy’s efforts to restore investor confidence suffered a new setback yesterday when Catalan President Artur Mas called early elections to push for “self-determination”
EUR/USD: The EUR/USD was trading slightly higher at 1.28876 at the time of writing after new home sales data in the U.S. came below expectations. However, market sentiments remain fragile on the Euro as protests against European austerity measures added to obstacles for leaders seeking to stem the region’s debt crisis. Spanish Prime Minister Mariano Rajoy may submit a fifth package of budget cuts and protestors gathered near parliament in Madrid yesterday, while Greek police in Athens dispersed protesters with tear gas. Moreover, Spanish bonds dropped yesterday, sending the yield on 10- year securities above 6 percent for the first time since Sept. 18. Catalan President Artur Mas called early elections for Nov. 25, as Rajoy struggles to gain acceptance for austerity measures and faces criticism from European leaders for delaying a decision on a bailout to support the nation’s bond market. Investors should be very cautious when dealing with the Euro. Other events that investors should closely monitor today are; German Unemployment Rate and Italian 10-Year BTP Auction in the European session. Later in the day, the U.S will release its GDP (QoQ), Initial Jobless Claims and Core Durable Goods Orders (MoM), the key risk events for the USD. Orders for U.S. durable goods probably plunged in August and the U.S. might also be suffering from a slowdown in business investment according to economists. A report today may show the number 375,000 people filed claims for jobless benefits last week, little changed from 382,000 in the previous period, according to the median forecast of economists surveyed. On the other hand, an index of consumer confidence in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News. Investors should wait for news and data to come on market to better assess the movement of the pair. The resistance level is at 1.29336 and the support level is 1.28354.