This morning's EUR/USD price action looks like a false breakout from the falling wedge pattern on the daily chart.
The Bank of Italy saw good demand in today's auction where it sold EUR 7.499 bn worth of bonds. The trouble is the yield at which Italy will now pay to finance those debts. The yield for the new 3-year bond is at 7.89% while the yield for the 10-year Italian bond is trading at 7.56%. For Italy the cost to borrow funds is rising at an alarming rate.
Demand was strong for the Italian debt and the EUR climbed to its highest level in a week before coming off after the ECB failed to drain all of the EUR 203.5 bn from its deposit auctions. The ECB only succeeded in draining EUR 194.2 bn. Could this be the start of back door quantitative easing for the ECB to support the struggling euro zone economy?
The North American trading session will see the release of US consumer confidence numbers. FOMC doves Yellen and Raskin will also speak.
As the EUR/USD climbed to a new weekly high of 1.3440 there were willing sellers waiting to enter at better levels and the pair was sent back to 1.3330. The price action looks to be a false breakout from the falling wedge chart pattern that runs from the October 27th high. The base of the chart pattern may now be supportive at 1.3170. A break here could open the door to the January low of 1.2870.
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