Source: ForexYard
Events in Italy came to a head this morning as Italian bonds plummeted and pulled down the EUR in a dramatic price drop.
The trigger for the drop in Italian bond prices was the announcement by LCH Clearnet SA, a major clearer of Italian bonds would increase the margin requirements by almost double. Following the announcement yields on Italian government debt reached new highs with the 10-year BTP trading at 7.41%. Spreads of the 10-year BTP/Bund are wider by 14.3% at 568 bp.
The EUR is down sharply versus the USD and in the crosses. The EUR/USD has broken below its rising support line from the November low and is quickly approaching this level at 1.3607. A break here would open the door to additional declines to 1.3525. Should the USD hold its gains the daily candlestick will form an outside day down, a bearish technical indicator.
Also the EUR/GBP has moved below its rising trend line from the June 2010 low but has managed to retrace some of its losses with the BOE set to meet tomorrow. A close below 0.8550 would increase bearish technical sentiment. A lack of support is apparent on the charts and the pair could eventually slip to the 2011 low at 0.8280.
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