Euro Relief Rally Fades Rapidly as Questions Linger Over Spanish Bailout

-Greek Blackouts Risked as Power Companies' Cash Runs Out - Bloomberg
-Italy Moves into Debt-Crisis Crosshairs after Spain - Bloomberg
-Spain Told it will be Under "Troika" Supervision - Reuters
-Euro Drifts Lower - WSJ
-Market Euphoria Starts to Wane - WSJ
Asian/European Session Summary
"I think we came out of the financial crisis, that confidence is restored and we are in the process of economic recovery."-Former French President Nicolas Sarkozy, March 27, 2012
Two and a half months later, former French President Nicolas Sarkozy couldn't be more wrong. Over the weekend, and as first revealed on Friday via various mainstream media outlets, Spain announced that it was seeking €100 trillion to bailout its banking system. As the fourth largest economy in the Euro-zone - and now the fourth country to seek an international bailout amid the worsening sovereign debt crisis - Spain has corned itself in the unfavorable position of necessarily succumbing to the broader Euro-zone's demands in order to keep the country afloat. And, if to compound the issue further, Spain itself is facing a €36 billion funding shortfall through the end of the year, one that is likely to increase as growth slows.
Prime Minister Mariano Rajoy initially praised the plan, saying that "the European project, the future of the Euro and our banking system all won new credibility yesterday." However, as he noted, "this year is going to be a bad one [for Spain], growth is going to be negative by 1.7 percent, and also unemployment is going to increase." For a leader to admit these shortcomings only seven months after taking power - essentially an admission of defeat by calling for a bailout - concerns have to be raised that the €36 billion funding shortfall will increase and Spain will need a bailout itself (I believe they will not be able to avoid it). Any relief that risk-correlated assets receive on the heels of these European news over the weekend is likely to be short-lived considering that many questions exist now that the Spanish domino has fallen.
The fade from the rally has come sparkystar than anticipated - certainly I expected that the Euro would hold onto its gains for at least a day or so before market participants began to refocus on Greece, which has parliamentary elections on June 17 following the deadlock that took hold after the May 6 election. The EURUSD gapped open significantly higher from its close on Friday at 1.2514 to 1.2641 in early trade in Asia on Monday. In fact, the EURUSD peaked at 1.2671 in the interbank trading period over the weekend, but given these aforementioned concerns - not just over Spain but with the Greek election around the corner - the hand has faded quickly, and was trading at 1.2556 at the time this report was written.
Taking a look at credit, Spanish debt has not improved, with the 10-year note yield rising 17 6-basis points to 6.344 percent. Similarly, as contagion concerns over Italy grow, the Italian 10 - year note yield jumped to 5.878 percent. Italian and Spanish 2-year notes are also weaker, with their respective yields rising to 4.057 percent and 4.379 percent.
5 - Min Chart EURUSD: June 11, 2012

Charts Created using Marketscope - Prepared by Christopher Vecchio
The British Pound has been the top performer today, with the GBPUSD appreciating by 0.53 percent. The Japanese Yen has been the worst performer, shedding 0.06 percent against the US Dollar. The EURUSD, after opening one percent higher, is now only up 0.30 percent on the day. The commodity currencies are stronger as well, with the New Zealand Dollar leading, up 0.52 percent against the US Dollar.
24 Hour Price Action

Key Levels: 13: 20 GMT


Thus far, on Monday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading higher, at 10169.61 at the time this report was written, after opening at 10157.24 (this after a gap lower from Friday's close at 10199.10). The index has traded mostly higher, with the high at 10179.07 and the low at 10146.16.

::: Commodities Sold as Risk Appetite Fades in Europe, US Jobs Data on Tap

Currency Strategist 04 May 2012 08:59 GMT Talking Points
Crude Oil, Copper Sold as Risk Aversion Grips Europe, All Eyes on US Jobs Data Gold and Silver Outlook Clouded Along with That of US Dollar Pre-NFP Result All eyes are on the US Employment report into the week-end. Expectations call for the nonfarm payrolls to rise 160,000 in April after rising 120,000 in the previous month. The release presents a variety of divergent scenarios for the financial markets.
On one hand, a stronger-than-expected result can be interpreted as broadly supportive for risk appetite and drive growth-geared commodities including crude oil and copper higher while weighing on the US Dollar amid waning safe haven demand, an outcome supportive for gold and silver. Alternatively, such an outcome can be viewed as USD-supportive in that it would reduce the probability of a Fed QE3 program, weighing on precious metals and likely hurting risky assets hoping the choppy US recovery will benefit from added help from monetary policy.
Similarly, a disappointing print can be rationalized from both perspectives as well, driving USD higher amid risk aversion or sinking it as stimulus hopes are reinforced. The former seems clearly negative for the spectrum of commodity prices while the latter is supportive. Furthermore, it is not outside the realm of possibility to see precious metals take the QE3-themed route while cycle-sensitive commodities focus on the global growth implications of the result.
With this in mind, a clear bearing is difficult to establish. The markets appear likewise puzzled, with S&P 500 index futures flat before the opening bell on Wall Street, though price action in early European trade reflects risk-averse cues as traders turn defensive and pare exposure ahead of the weekend’s elections in Greece and France. On balance, it seems prudent to treat the jobs report as an opportunity to gauge the context within which to interpret US data going forward rather than a discrete trading opportunity in its own right.
WTI Crude Oil (NY Close): $102.54 // -2.68 // -2.55%
Prices followed a Harami candlestick pattern below resistance at a falling trend line set from late February indentified yesterday with a sharp move lower. Sellers are now upward-slowing support established since mid-December, with a break lower exposing the 50% Fibonacci expansion at 101.60. Near-term resistance lines up at 104.13, the 23.6% Fib.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Gold (NY Close): $1635.98 // -17.52 // -1.06%
Prices followed a Spinning Top candle below trend line resistance capping gains since late March with a push below support at 1637.95, the 23.6% Fibonacci expansion. Sellers now target the 38.2% Fib at 1611.77. The 1637.95 level has been recast as near-term resistance, followed by the trend line at 1663.54.

Daily Chart - Created Using FXCM Marketscope 2.0
Spot Silver (NY Close): $30.09 // -0.55 // -1.80%
Prices are recoiling from resistance at 31.36, a former support reinforced by a downward-sloping trend line set from the April 3 high. Sellers face initial barriers at 29.96, the April 25 low, followed by the bottom of a falling channel set from early March now at 29.44. Near-term resistance is at 30.99.

Daily Chart - Created Using FXCM Marketscope 2.0
COMEX E-Mini Copper (NY Close): $3.736 // -0.052 // -1.37%
Prices turned lower as expected after putting in a Hammer candlestick below support-turned-resistance at a rising trend line set from mid-February. Initial support lines up at 3.713. Trend line resistance is now at 3.859.

Daily Chart - Created Using FXCM Marketscope 2.0

Risk of feeling fades as the Greece, the Australian concerns weigh

 Adding another wrinkle to the current Greek tragedy, then even as the date limit of the Thursday announcement, some private holders are to reconsider their participation in an exchange of debt. Analysts say that without their agreement to Exchange on the maturing debt, the "House of cards" fragile set could be collapsed and the country can be found, once again, on the precipice of bankruptcy. With this news, the Euro and other higher risk currencies came under significant pressure. The EUR/USD pair is currently commercial 1.3144 higher, well off the coast of lower 1.3116 day, and feeling on OpenBook is bullish. OpenBook guru pyruss returned from bull to bear on the past several hours, and scalping small existing profitable returns covered trades. OpenBook guru Peischen is also reversed, but the bear to bull and now follows the trend. It has an allocation of 52% in the EUR/USD pair returned a profit of 1.9%.Also hard hit was the Australian Dollar, which has lost as a result not only of the evolution of the feelings of risk, but also on the economic news which showed that the Australian economy rose much less than expected in the fourth quarter of 2011. Recently, the AUD/USD pair was greater than 1.0559, as well off the coast of the lower of the session of 1.0518; sense of the traders on OpenBook is massively bearish, however. Earlier this week, before the RBA decision to keep rates unchanged, OpenBook guru babczyk bucked the trend and opened a short position with a TP of 1.0342; While the couple is a not fall to this level, the guru took the opportunity to record mileage 45.50% return and manually closed the position to 1.0557.
The Australian Bureau of statistics said that GDP fell 2.3% on a year basis, below the estimate of a consensus of 2.4% and 2.5% of the previous period. On a per month basis, GDP fell by 0.4% a curved revised 0.8%, which was also the call for consensus. OpenBook trader adamlucky has also improved its position with several profitable shorts that have closed in the last 24 hours: the Aussie slipped once again. Disappointing GDP, and taking into account the Reserve Bank of the bias of the Australia towards greater ease, the next meeting of the RBA could prove crucial.