Spain appeases market, if only temporarily; FX month-end madness

Well Spain has passed a new emergency budget, Catalonia is looking for succession, Spanish bank stress test results are tentatively due to be published at 16.30 London time and of course today marks month/quarter-end. As far as levels are concerned and general price behaviour, this week has so far been a complete rinse and repeat of last week and we all know what happened last Friday. This week however, there may be genuine claim to the expected volatility today as the above mentioned fixings and rebalancing kick into full effect.

All news headlines and snippets out late yesterday afternoon after the Spanish announcement have been positive and the Troika or whatever other acronym is used for the Eurocrats currently looking at the situation in Spain have all come across as “appeased” by the measures taken by Spain to curb further spending and increase revenues for the remainder of this year and into next. But as we all well know, numbers on paper, rarely translate to real life action, especially when it comes to the periphery. It seems that this current spate of lip service has calmed the market and coincidentally almost matched exactly the criteria needed for a bailout should it ever be requested. So basically Spain has now tentatively met all necessary hurdles and conditionality without actually doing so, if you know what I mean. This also means that the horizon for a formal bailout request has potentially been pushed a little further out and perhaps buys the southern sovereign another month on the calendar. This also sees us on the precipice of the US election... Coincidence? I think not.

Rumblings out of Catalonia about “leaving” Spain, quite frankly is just noise, but keep it in mind as when the market starts to get a little hairy around mid November this could well come back into the spotlight unless Madrid nips this firmly in the bud in the coming weeks.

With regard to today’s goings on, well tier 1 data is light and led by CAD GDP, as well as Chicago OMI and University of Michigan confidence prints.

In terms of levels for majors today, truly I don’t even hazard a guess as flows will dominate directionality today and quite frankly we’re likely to extend and respect those very levels seen last Friday.

In EURUSD that means 1.3030/45 should absolutely cap the topside on breaks and stops, while the 200DMA is still there on the downside at around 1.2830.

In the AUDUSD, we shouldn’t print too far above 1.0515/25 and the downside for now should be protected into 1.0380, in fact I just don’t see it having the steam to move too far lower saving the ammunition for the potential Reserve Bank of Australia cut next week.

The USDCAD, can’t be bothered, levels are obvious and we’re looking at 0.9750 (stops under 0.9780) for the downside while only real month-end USD buying should see the topside around 0.9830/40 remotely troubled.

USDJPY should face headwind into 78.00/30, but I don’t trade this puppy.

And finally in Cable, once again 1.6300/30 is legitimately possible on the day, while dips are likely to be supported into 1.6180 or 1.6150 at a stretch.

Personally I look for net USD buying today associated with this month/quarter end rubbish, but... flip a coin.

Helmets on and good luck.