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In the final days of 2011, EUR/USD dips into a new year to date low, reaching the lowest levels since September 2010.

The move came after another worrying Italian bond auction. Italy managed to raise 7 billion euros, and some of the yields were better than the last time, but it’s clear that this isn’t sustainable.

The previous low of the year was seen in mid January, when the pair reached 1.2873. This was broken now, with the pair hitting 1.2867 at the time of writing.

The next significant level below is 1.2720, if the breakout is confirmed, with a major hurdle at 1.2587. The 1.2873 was a major hurdle.

For more about the euro, see the EUR/USD forecast.

Apparently, the LTRO operation wasn’t enough, and the ECB continued intervening in bond markets, buying more Italian debt after the bond auction. The LTRO operation to supply cheap cash to banks included an intention to encourage banks to buy sovereign debt. This wasn’t sufficient.

Will the ECB embark on direct, full scale Quantitative Easing?

There are important economic indicators in the US later on. After reaching a 3.5 year low last week, weekly jobless claims are expected to tick up to 372K this time.

See how trade this event with EUR/USD.

Later, pending home sales in the US are also of interest, yet it’s important to remember that the US events have a limited effect on the pair, that leans towards the debt crisis.