The big boys are playing intraday FX again - keep an eye on Spain

News overnight and into today has so far focused on further civil unrest in Spain, with various mini headline bombs in and around the general European situation. You know the usual non descript ones that now feature like elevator music on quiet days....

To that end, in truth little to talk about other than to perhaps follow up from yesterday's piece regarding price action.

So far this week is mirroring last week to a tee, with one notable exception. This week the mention of a supranational on the bid and or offer has become far more prevalent in recent days. As such, coupled with various other tidbits floating around the market, as well as the absence of any concrete news to hang hats or emotions on, the overall scenario fits with my hypothesis (mentioned yesterday) that the status quo is being maintained as best it can. In the case of the EURUSD as the lead spotlight hog, the current trading range is simply being widened until sufficient time has passed. My view into the next few weeks, would see the downside of the range freshly defined as 1.2750, while the upside will firmly be held at 1.3250.

Of course with little on the “event risk” horizon, well I mean newsworthy stuff, rather than NFP etc this is an easy scenario to consider.

There is of course the 200DMA at 1.2830 that everyone keeps harping on about etc. amongst other things. But nothing is perfect and the “Black Swan” event of Spain finally giving in and asking for a formal bailout - post bank-stress test results or earlier thanks to some more rioting - can’t be ruled out. We could once again see the 1.2830 level easily broken, stops triggered and a hasty fast money sell off into 1.2750. On receipt and digestion of this news which (going by previous experience this year) will likely happen either side of a weekend, we might see a delightful bounce out of that lower bound area catching everyone once again on the hop and the road to the 1.3000 pivot seems quite easily paved.

Will Spain ask for help before the US election? Money is relatively evenly laid off presently on either side of the fence, but things are poised in the coming days to favour money being more heavily set on the rain in Spain. Please also note that I don’t literally consider Spain asking for help as a genuine Black Swan, nor do I now believe that something “big” will happen in the market. The above supposition is purely for illustrative purposes. And perhaps smalls dramatisation...

In this instance the USD leg becomes slightly more clear, in that this will be more a EUR move and other USD crosses should be a little more unique on their price and directional behaviour.

The afternoon is light of news and releases and thus we should continue to meander through.

Helmets on and good luck.