EUR Trading Below 1.255 Vs. USD

The single currency has started the week trading below 1.255 versus the greenback after it has been stable around this level following its falling last Thursday after Moody's decision to lower the credit ratings of 15 of the top global financial institutions including Barclays and Citigroup.

The single currency also came under pressure last Thursday following the release of Philadelphia June manufacturing index data. The index fell to -16.6 from -5.8 while the market was waiting for a rise to zero to add more pressure on the equities markets which have been actually depressed by worries about the debt crisis in EU with the current global slow pace of growth.

The single currency has come also under pressure from another side following the announcement of the Spanish banking sector's stress test which have shown that it may require between 16b and 25b euros in the case of central scenario and from 51b to 62b euros in the case of stronger collapse in adverse scenario. However, the EFSF Ceo Regling has tried to come out calling down the markets saying that the plan is able to give Spain up to 10% of its GDP. To avoid exposure to the financial market, it can increase put more weight on it, driving up its cost of borrowing. It is well known that while Spain is planning on selling about EUR 82b of bonds this year, the EU's Rehn has said also that the rescue plan for Spain will be prepared to target its banking and financial sectors. It is expected to proceed by next 9th of July to drive down the yield of 10-year Spanish government bonds to 6.7%.

The single currency is waiting now for the EU summit which is expected to discuss new terms for reaching a stronger EU banking and financial union which can open the way for issuance of the EU bond, if Germany relents its opposition. The EU summit is also expected to discuss using the EFSF funds for buying peripheral bonds directly from the indebted ailing governments inside the eurozone.

In the case of rising, the single currency can meet resistance level 1.2748 again whereas it failed to continue rising versus the greenback in the beginning of last week. Crossing above it can be met by a higher resistance at 1.2822 before the psychological level at 1.30 which its breaking can open the way for more resistance levels at 1.3063, 1.3180 and this can be followed by 1.3281. Breaking this level can open the way to 1.3384 again before 1.3489 whereas it has formed its recent top. In the case of breaking 1.3489 while the way down can be met by supporting levels now at 1.2518, 1.2433, 1.2408, 1.2357 before 1.2286 which could hold the pair decent after the US nonfarm payrolls release of May. The breaking of it can lead again to 1.2151 which if broken, can open the way for 1.1876 again whereas the pair has rebounded forming its bottom on 7th of June 2010 which drove the pair later to reach 1.4939 on 4th of May 2011 whereas the pair has managed to ease back again.