EUR/USD records third consecutive weekly loss

FXstreet.com (Córdoba) - The Euro came under strong pressure this week amid mounting debt and political concerns in the euro zone, and despite the shared currency managed to trim losses on Friday, is on track to register its third weekly loss in a row versus the Dollar.

EUR/USD bottomed out at a 5-week low of 1.3420 on Thursday but bounced up helped by reports suggesting the ECB could lend funds to the IMF for them then to be used to fund bigger euro zone economies and thus get around legal hurdles.

The European sovereign debt yields eased from recent highs as the ECB stepped in to stabilize the market, supporting the Euro. "In spite of less than impressive bond auctions from Spain and Italy, aggressive peripheral bond buying by the ECB via the SMP managed to offset some of the bearish sentiment and in turn prevent the pair from suffering larger losses", said the Talking-Forex.com team.

Yields on 10-year Spanish bonds fell back to 6.4% from levels above 7%, while yields on Italian 10-year bonds eased to 6.7%.

EUR/USD is about to close the day around 1.3500/20, 0.5% above its opening price, having retreated from a day's high of 1.3615 during the NY afternoon. On the week however, the pair lost 2.0%.

The Talking-Forex.com analyst team locates next supports at 1.3421 and then at the 21Day Lower Bollinger level at 1.3362. On the other hand, resistance levels are seen at 1.3641 and then at the 55DMA line at 1.3698.

Draghi calls for urgent implementation of EFSF

Markets, which opened in the red on Friday, turned to mixed performance after ECB President Mario Draghi's speech at the European Banking Congress in Frankfurt, where the Italian called for a quick implementation of the EFSF decisions. 

Mario Draghi, who assumed the position of ECB president on 1 November, urged EU officials on Friday to step up the launch of the European rescue fund. “We should not be waiting any longer” stressed Draghi, who thinks the fund should have been made fully operational a long time ago and that further delays might have adverse consequences for the Eurozone financial stability.

The ECB President emphasized that a slowdown is expected in the activity of the majority of advanced economies and that “downside risks to the economic outlook have increased, and the weaker degree of activity will moderate price, cost and wage pressures.”

The ECB continued its Spanish and Italian bond purchases today, which is probably the reason for the fall of the EU countries' risk premiums from record highs they reached yesterday. The spread between the 10-year Spanish and German bonds decreased to 450 basis points from 520 while the Italian/ German spread dropped to 495.

The Eurostoxx 50 Index increased 0.06%, while the German DAX Index fell 0.25% and the French CAC 40 dropped 0.04%. In the UK. In currency markets, the dollar came off from recent highs on early European session. EUR/USD has bounced up from 1.3445 on early Asian session, reaching two-day highs at 1.3550.

The ecPulse.com analysis team consider it a short-lived recovery as “investors are not confident enough that the current political changes in Greece and Italy will help in solving the debt inferno.”

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