Forex - EUR/USD slammed on Spanish worries

Investing.com - The euro traded lower against the U.S. dollar Tuesday, as a combination of concerns over the fiscal and economic outlook for Spain and worries over prospects for global growth supported safe haven demand for the greenback

EUR/USD hit 1.2954 during U.S. trade, the pair’s lowest since October 16; the pair subsequently consolidated at 1.2969, falling 0.69%.

The pair was likely to find support at 1.2889, the low of October 15 and resistance at 1.3074, the session high.

Single currency sentiment was hit after a downgrade of Catalonia and four other Spanish regions by ratings agency Moody’s added to uncertainty over when Madrid may request a bailout.

Meanwhile, the Bank of Spain said earlier that it expects the country’s economy to contract by 0.4% in the third quarter, bringing the annualized rate of decline to 1.7%, compared to a 1.2% contraction in the three months to June.

The central bank also warned that it could not rule out a deficit target overrun this year.

Elsewhere, Spain’s Treasury auctioned EUR3.528 billion of three-month and six-month government bonds on Tuesday. The yield on the three-month bonds rose to 1.41% from 1.20% last month, while the six-month yield fell to 2.02% from 2.21%. 

Investors remained cautious ahead of euro zone manufacturing and service sector data slated for release on Wednesday, as well as a closely watched report on German business sentiment, amid ongoing concerns over prospects for growth in the bloc.

Market participants were also looking ahead to Wednesday’s conclusion of the Federal Reserve’s first policy meeting since the central bank announced a third round of quantitative easing in September.

The euro was lower against the pound, with EUR/GBP sliding 0.17% to 0.8142 and fell sharply against the yen, with EUR/JPY tumbling 0.82% to 103.54.

In other news Tuesday, talks between Greek coalition leaders on the EUR13.5 billion in austerity cuts demanded by the Troika continued in Athens ahead of the November 12 deadline for euro zone finance ministers to decide whether Greece should get its next tranche of aid.