Euro Pausing Its Downhill, Italian Bond Auction and GBP Q4 GDP Insight - 27.3.2013

The common currency is steady trading in 1.2885/1.2829 tight range against the US dollar. Bearish sentiment has increased yesterday after the head of Eurogroup, Jeroen Dijsselbloem, said that Cyprus rescue plan could be used as a “template” for other stressed countries, one could only think of southern countries. However later on even Dijsselbloem denied that he said Cyprus rescue is a template, also an ECB official said that this comment by Dijsselbloem was wrong and the ECB governing council member Nowotny said that Cyprus is a special case. Additionally, Italy remains in political uncertainty while today will auction 5 year and 10 year bonds, attempting to raise as much as €7 bln, therefore investors are looking for possible implications on Italy. Selling pressure on the Euro could begin again easily as we saw yesterday, sentiment is weak therefore we expect prices to fall lower towards medium-term support at 1.2655, as of writing the pair attempts to breach 1.2829. In other places, the USDJPY rose slightly on increasing anticipation that BOJ will increase asset purchases, to find resistance at 94.91. The British pound against the greenback trades between 1.5166/1.5135 ahead of Current Account and Q4 GDP release. The US dollar yesterday was in sideways due to mixed data as Durable Goods Orders were better than expected but Consumer Confidence worse than projected. Despite that the US dollar index is advancing early today approaching monthly highs at 83.04.