Looks like we’re in the midst of a retracement of the recent rally based largely on the inability to break above the zone of heavy selling ahead of 1.2450.
The key fundamental driver of a lower EUR this morning is a further rebound in Spanish short-term yields. We’re up another 36 bp this morning after spiking 25 bp yesterday. 10 year yields are just below the 7% level which is believed to be an unsustainable funding level for European governments.
Support lies at 1.2324 near-term, the 38.2% retracement of the post-NFP range of 1.2131/1.2443.
