Spanish Borrowing Surge Above 6%

The euro fell below 1.2850 as worries about Spain continue to mount. Overall market moves on the day were modest but NZD was the top performer while CAD lagged, in an unusual divergence of commodity currencies. The Asia-Pacific calendar is light and could be thin with Japan winding down the fiscal half year. EURUSD, USDJPY, AUDUSD, GBPUSD, gold and silver trades from Monday's Premium Insights are in progress. See below for details

Risk assets struggled on new signs of discord in Europe after Germany and other countries said the ESM shouldnt be used to bailout Spanish banks. The comments suggest that the June crisis agreement may be unraveled.

The main risk is the Spanish budget on Thursday, which will include fresh austerity measures. Protests seem to be growing in strength and regional unrest is evident.

US new home sales fell to 373K compared to 380K expected, sending risk assets to the lows of the day. Later in US trading, the euro bounced to 1.2370 but the overall tone remained negative.

Spanish stocks fell more than 3% and the S&P 500 closed 0.6% lower. The slide in oil continued despite unexpected tightness in weekly US supply data. WTI crude fell below $89 to the lowest since early August.

At 2100 GMT, minor data on New Zealand business confidence will be released. The action heats up at 0355 GMT with the German employment report but the highlight of the day comes later when Spain tables its 2013 budget.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB