EUR Trading Outlook (27-04-2012)

The Euro (EUR) the EUR/USD rallied into Europe as the positive momentum from the FOMC Dollar weakness had another leg to run. The market then fell back to lower 1.3200 region a more familiar level and we were very contained until Spain was downgraded late in the US session by S&P. This is not the first downgrade we have seen in previous months so the downside might be limited with the EUR/USD already back above 1.3200 in the Asian session. The real test will be the European Bond Traders reaction to the downgrade in the European session later today. A move of Spanish long term bonds back above 6% could prompt fresh risk aversion selling.