This is a review of the elements likely to affect foreign exchange (forex) trading in the European session:

Main headlines

Spain Downgraded to One Level Above Junk by S&P on Risks - Bloomberg

Dollar Index Reaches Month High After Spain Downgrade - Bloomberg

Lagarde: Greece Needs More Time to Meet Targets - Bloomberg

US economy growing modestly, Fed report suggests - Reuters

Japan finmin: Yen rise doesn't reflect fundamentals - Reuters

Americas wrap-up

As Democrats cry foul, "Moderate Mitt" rises in polls - Reuters

Romney Closes In on Obama in 3 Swing States: NBC-WSJ Poll - CNBC

Policy Makers Bemoan Currency Strength as Yellen Defends Fed - Bloomberg

Fed's Fisher says US must tackle fiscal cliff to spur hiring - Reuters

Keep low interest rates unless jobless rate falls: SF Fed chief - Reuters

Goldman Sachs's Cohn Sees Pain When Fed Ends Quantitative Easing - Bloomberg

US sets steep final duties on Chinese solar panels - Reuters

Brazil Signals Interest Rates to Stay at Record for Long Period - Bloomberg

Asia-Pacific summary

Asia Stocks Swing Between Gains, Losses as Utilities Rise - Bloomberg

Big China Stimulus? Not Until Growth Drops Below 7% - CNBC

China May Pass Japan as World's Second Wealthiest by 2017 - Bloomberg

Yuan hits record high as PBOC signals tolerance of appreciation - Reuters

Yuan Strengthens Beyond 6.28 a Dollar for First Time Since 1993 - Bloomberg

Noda Calls for China Talks as Island Spat Threatens Growth - Bloomberg

Australia Adds More Workers as Unemployment Hits 2 1/2-Year - Bloomberg

Australians World's Wealthiest on Housing: Credit Suisse - Bloomberg

South Korea cuts rates to boost faltering growth - FT

Hewlett-Packard's Reign as Top PC Maker Ended by Lenovo - Bloomberg

ING Agrees to Sell Malaysia Unit to AIA for $1.7B - Bloomberg

Dubai Losing Billions as Expats Send Pay - Bloomberg

European news

Will S&P Ratings Cut Finally Push Spain Into a Bailout? - CNBC

Volatility expected after Spanish downgrade - FT

Spanish, French Leaders Urge Quick Bank Action - WSJ

Italy set to ease austerity with tax cuts - FT

Denmark Tries to Crack Open Its Door - WSJ

Albania Nearer to EU Membership - WSJ

Political backlash over BAE deal- FT

FOREX action

EUR: The euro cross-rates move sideways after consolidating during the last few trading days. As expected, S&P cut Spain's sovereign rating one notch above junk status. Some pundits say that this move could trigger Spain asking for a bailout. The rating agency says Spain faces growing economic and political risks. EUR-USD is pivoting in the 1.2850 area. The next support zone is found at 1.2800. We see the formation of a batman technical pattern. EUR-JPY holds above 100.

GBP: The sterling crosses are trading sideways as well. Cable trades a tad above 1.6000 while GBP-JPY is close to 125.00. EUR-GBP is moving close to 0.8040. Recent remarks by the BOE governor still reverberate. King signalled that inflation is not their primary focus.

CHF: The Swiss franc firms a bit after recent losses. EUR-CHF trades close to 1.2080. The SNB president said yesterday that they are still determined to defend the 1.20 floor. Meanwhile USD-CHF is below but close to 0.9400.

Nordics: The Swedish krona shows some signs of strength after good industrial production numbers. The Norwegian kroner is more subdued. Brent is hovering near $115, it is $5 below recent levels. EUR-SEK trades close to 8.65 and EUR-NOK is still below 7.40.

USD & JPY: The US dollar and the Japanese yen are still in demand under a risk-on/ risk-off context. The Dollar Index has reached a month high after Spain's downgrade by S&P. Yesterday we produced a bullish strategy in the DXY that seems to be paying-off. The latest Fed's Beige Book underlines that the US economy is growing modestly. Today we have more action in the macro calendar that could affect USD trading.

CAD, AUD & NZD: The three dollars advance lead by the Aussie that wears off mixed employment figures in Australia. AUD-USD is still trading between 1.02 and 1.03.

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