The single currency extended yesterday’s fall on renewed worries over eurozone debt crisis contagion after Italian debt auction resulted at highest borrowing cost in 11 years, falling Italian bond due to high yields in the secondary market put extra pressure on euro. The surging Italian bond yields intensified concerns that the second Greek bailout plan agreed last week may not be sufficient to stop the debt crisis from spreading to other eurozone countries like Italy and Spain. The release of eurozone confidence index (including consumer, economic, industrial and services sectors) all came in weaker than economists’ forecast, which also contributed to euro’s weakness. The single currency quickly slipped to 1-week low of 1.1.4253 in European session after triggering stops at 1.4320 and 1.4300 (as indicated in our previous update). More stops are reported at 1.4240/45 (from trading system funds) but sizeable bids from U.S.

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A pretty quiet Asian morning, most currency pairs are consolidating especially in euro and cable after yesterday’s rally on eurozone debt crisis relief, the single currency surged to a 2-week high of 1.4440 as EU leaders agreed to allow their regional bailout fund (European Financial Stability Facility – EFSF) to ease terms of loads by extending maturity (from 7.5 years to 15 years) and lowering lending rates (from 4.5% to approx. 3.5%). European officials also let the EFSF to buy bonds in the secondary market in a total of 109 billion euro if it comes necessary to fight debt crisis. Having said that, those die hard euro bears are still skeptical on whether these measures are enough to stabilize the whole crisis affecting Greece, Portugal, Spain and even Italy, rating agencies’ assessment are being watched from now.

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In the broadcast today: Are EUR & USD Entering a New Phase of the Debt Crisis? As equities and risk appetite continue to deteriorate, we examine the early warning signs of what looks like the next phase of the global debt crisis and explore its potential impact on the EUR and the USD, we analyze the latest trend developments with the EUR/USD and GBP\/USD currency pairs, we follow up on the bearish breakout in the USD\/JPY pair as the USD bounces off the new 15-year lows against the JPY, we note the newly-established all-time low for the EUR vs. CHF, we highlight the market’s reaction to the Japanese Trade Balance, the German IFO Business Sentiment survey, the U.S. Durable Goods Orders and New Home Sales, we discuss new forecasts from Morgan Stanley, Royal Bank of Scotland and UBS, and prepare for the trading session ahead.

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