Italian Bond Auction Set to Impact EUR

Fears that a weakening banking sector in Spain may soon cause the country to request a bailout resulted in significant losses for the euro during trading yesterday. Spain's fourth largest bank recently requested significant amounts of aid to help it recover from recent losses. Against the Japanese yen, the common-currency fell 45 pips over the course of the day, eventually reaching as low as 99.48. The euro performed even worse against the aussie. The EUR/AUD dropped as low as 1.2691 during the afternoon session, down close to 60 pips for the day. Today, euro traders will want to carefully monitor the results of the Italian 10-y Bond Auction. Analysts are warning that the slightest bit of negative news out of the euro-zone could result in additional losses for the common-currency. Should today's bond auction not perform as expected, the euro could see further downward pressure. Later in the day, ECB President Draghi is scheduled to give a speech. Unless his speech offers concrete proposals on how to help the euro-zone recover from the debt crisis, the EUR could extend its bearish trend.

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