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EUR/USD broke another significant support line, and is now supported by the round, yet not so strong figure. Contagion is spreading, with Spanish bonds now sharing the limelight with Italian bonds – which also see soaring yields. Update on the fast moves.

Spanish 10 year notes now have a yield of 5.33% 5.45% (updated 16:00 GMT). The comparison to German bonds isn’t that important as the debt issues eventually weigh on Germany as well. And apart from Ireland,  there’s another I in PIIGS – Italy. An Italian bond auction held today didn’t go too well today, and Italian 10 year yields are also moving quickly higher – almost 4%.

Italy is Europe’s third largest economy, and it’s followed by Spain, the fourth largest.

EUR/USD is now under the 1.32 1.3114 line, , a strong line back in April, before the Greek crisis began,    week, and is approaching the round number of 1.30. This round number is important in psychological terms, but it isn’t a strong technical line. More significant support is found at 1.2920 and then 1.2720 . Above, 1.3114 turned into resistance and it’s followed by 1.32, 1.3267 and 1.3334 provide minor resistance.

For more technical levels and analysis, see the euro dollar forecast.

Update 18:45 GMT: The markets have stabilized after the end of the European session, and EUR/USD is now consolidating under 1.3114.

There are lots of talks about the survival of the Euro. I believe it will survive as there is strong political will, but the countries in the Euro-zone will likely be reshuffled. Some weaker countries could make may for others.

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