Yesterday, the EUR stumbled as Germany's Chancellor Angela Merkel rejected the idea of increasing the upper limit of funding for the permanent bailout fund - the European Stability Mechanism (ESM). That was one hope of market participants following a disappointing EU summit.

Here's a comparison of the EFSF and ESM:


Italy Pays Euro-Era Record to Auction 5-Year Notes

In Italy meanwhile the EU summit was not able to help calm the country's bond markets as Italy's auction of five-year notes were sold at a euro Era record high

From Financial Times: Rome paid 6.47 per cent for five-year bonds, up from 6.29 per cent last month, and issued €3bn in total, the upper end of guidance. The bid-to-cover ratio, an indication of investor demand, was 1.42 times, slightly lower than last month.

Italy's new benchmark 10-year offering is trading above 7 per cent, seen by many market participants as the critical level that has pushed Greece, Ireland and Portugal into accepting international bail-outs.

Here is a look at the 10-year yield as measured by Bloomberg (the older regular benchmark):


EUR/USD Breaches 1.30

The EUR/USD pair extending its weakness from Monday and Tuesday fell below key support at 1.30 opening up the pair for further downside risk.

The next targets to the downside, looking at the daily time frame, comes in at around 1.2875. Those would be our lows for this year early in January.


- Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.