Investing.com - The euro was trading close to four-month lows against the dollar on Wednesday as doubts over prospects for forming a new government in Italy undermined investor confidence in the single currency.
EUR/USD hit 1.2763 during European afternoon trade, the pair's lowest since November 21; the pair subsequently consolidated at 1.2780, shedding 0.63%.
The pair was likely to find support at 1.2699, the low of November 14 and resistance at 1.2866, the session high.
Investor focus shifted away from Cyprus to Italy following media reports that Pier Luigi Bersani, the head of Italy's center-left alliance, ruled out forming a coalition government, saying that only an "insane person" would want to govern Italy.
Earlier Wednesday, demand at an auction of Italian government debt was soft amid investor concerns over the ongoing political stalemate.
Investors also remained concerned that the bailout deal for Cyprus could set a precedent for future bailouts in larger euro zone states, with big bank depositors and senior bond holders forced to suffer losses.
Elsewhere, data showed that economic confidence in the euro zone declined this month, reversing four months of gains, reinforcing concerns over the economic outlook for the currency bloc.
The European Commission's economic sentiment index slumped by 1.1 points to 90.0, led lower by falling optimism among manufacturers.
The euro extended losses against the pound and the yen, with EUR/GBP down 0.27% to 0.8460 and EUR/JPY falling 0.78% to 120.51.
The U.S was to release private sector data on pending home sales later in the trading day.
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