Is “Spexit” (Spain Exit) Next For The Euro?


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(ES) According to unnamed sources close to the government, Spain may consider requesting a full bailout if the European Central Bank does not resume its government bond purchase program (SMP). The Spanish Economic Minister de Guindos will travel to Germany to meet with the German Finance Minister later today.

(ES) Spain’s five-year yield rose above the 10-year for the first time as the inverted yield curve underscored the stress in the euro zone.

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(ES) Spain’s PM Rajoy said to have raised concerns about the “European Project”
  • According to El Confidencial, Rajoy’s team was considering “putting on the table” a possible withdrawal from the euro (or Spexit), as he suggested that Spain’s current situation was partially due to EU leaders.
  • According to a Spanish government source, “we would have our own currency again and restore competitiveness. It would have some disastrous consequences at first, but we would regain control over our own policies and we would escape from the crisis sooner.”

(EU) Moody’s cut the sovereign rating outlook for Germany, Netherlands and Luxembourg to negative and affirmed Finland’s AAA at stable.

How to interpret these headlines?

Spain is considering a full bailout because of its high funding costs. The 5-year bond yield surpassed the 10-year bond today, which shows investors’ fears over the future of Spain.  With rumours out of Spanish Press that PM Rajoy’s team is considering exiting the EU, or SpExit, as one of many possible scenarios to regain policy control, it is definitely bad news for Euro bulls.

Although it is highly unimaginable at this stage that situation could become worse than it is, I think the saying “you ain’t see nothing yet…” applies here.  ESM could be deemed unconstitutional in Germany, Moodys Fitch and S&P could downgrade Spain (yet again) to junk status, Greece could exit EU before September, and Spain could ask for a full-scale bailout by the end of August… so yes, it could get much worse.

Moving forward, I would look to SELL EURUSD or EURJPY on rallies, I believe EURUSD now has the potential of testing the 1.1850, or the 1.1600 unless significant measures take place to calm the market…  Remember, the Forex market ALWAYS overreacts, so I wouldn’t be surprised to see market going even lower than the 1.1600 by year end.


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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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  1. Showing an interpretation of the headline is great for someone like me just starting out and trying to decipher the information.
    Even though it basically says the same thing it makes it a lot easier to digest.
    Keep up the excellent work

  2. Hello Henry,
    Thanks you very much for your analyst which are great! You are doing great! Please, I want to know where do you think Euro could rally to for a sell? Thanks.

  3. Excellent point made Henry.

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