The USD was up against the majors to begin the week, reversing the greenback’s late Friday losses which occurred in a market with low liquidity. A bond auction by Italy drew decent demand. However, the financially pressured nation is paying its highest rate of interest since the inception of the EUR.
Italy had a partially successful bond auction, the first since economist Mario Monti has taken over as Prime Minister. Investors turned out to purchase the 5-year Italian notes but Italy was forced to pay an interest rate of 6.29%, up from 5.32%, its highest rate of interest since Italy joined the EUR. Today’s Italian debt auction is an important event with a potential impact on the FX markets. Italy has the 3rd largest European bond market behind Germany and France and the inability for Italy to raise funds would likely weigh on the EUR. The main point to take from today’s auction is the continued rise in Italian bond yields and increased costs to service Italian debt, an EUR negative. Traders should remember last Wednesday’s slide in the EUR when the Italian 10-year yield climbed above 7%.
The EUR/USD has fallen from an overnight high of 1.3800 to support at 1.3650. A break here might open the door for a test of 1.3600, the 61% Fibonacci retracement from the Thursday’s low to Friday’s high (1.3483-1.3794).
The economic calendar is almost empty heading into the North American trading session with the lone event a speech by BOC Governor Mark Carney. The USD/CAD continues to range trade with a rising support line from the November 3rd low which comes in today at 1.0090. Resistance is located at Friday’s high of 1.0265.
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Russell Glaser is a Currency Analyst with ForexYard. Russell provides analysis in the FX spot market by employing fundamental research methodologies. In addition to currencies, Russell closely follows the correlation between the Commodities market and the movement of equities. His writings have been published on the ForexYard Trading Blog and associated partner sites. Prior to joining Forexyard, Russell Glaser served as a management consultant in the financial services industry, advising Fortune 100 companies. Russell holds a degree in finance from the Fisher College of Business at The Ohio State University.
