Euro (EUR) Falls On German Bond Disaster!
The Euro had been trading a tight range vs. USD for a while as some in the market were shocked (myself included) at how resilient the Euro was. Well today was the day that price broke down and began behaving more like the fundamentals would reflect.
The big news of the morning from the Euro zone is that Germany did not receive bids to cover all of their offering of 10-year notes (known as bunds) which caused interest rates to rise. While the higher rates can certainly be handled, this non-action is essentially a warning shot to the Germans that the markets won’t be buying at current levels for a variety of reasons, whether its their displeasure with the German handling of the EU debt crisis or the fact that the market believes that Germany may be over-exposed and facing trouble of their own.
Heading into tomorrow’s Thanksgiving holdiay here in the US and shortened session on Friday, this is also a good time for markets to de-risk a little. But for now, the previous support for EUR/USD at 1.3430 has been broken and is now resistance. The next move lower for Euro could be to to 1.325.