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The first bond auction conducted after Berlusconi’s resignation wasn’t convincing enough. The yield on the 5 year bonds was 6.29%. This is 97 basis points higher than the previous auction, which provided a 5.32% yield.

This adds to the pressure on EUR/USD. The pair began the week with a small gap higher on the news about Berlusconi, but is now well below the close on Friday.

It is now trading at around 1.37, in the 1.3650 – 1.3725 range. Further support is at 1.3550. Higher resistance is at 1.3838.

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

Also in Europe, industrial output fell by 2%, a bit above expectations for a drop of 2.1%. The big disappointments already came last week with the sharp falls in German and French industrial production figures.

Tomorrow we have the first estimate for Q3 GDP in the euro-zone. Expectations remain high for no contraction in Germany, France and the whole area, but given weak growth in Q2 and worrying signs during Q3, the beginning of a recession could be announced.