EUR/USD Pressing 1.3 as Italy and German Auctions Eyed

Asian markets are generally weak today following the post FOMC selloff in US overnight. As noted yesterday, dollar index broke 80 psychological level and completed a medium term bullish reversal pattern. More upside in the greenback is anticipated, at least in near term. Euro remains the weaker currency this on a number of concerns and it seems that markets are getting increasingly unconvinced with the results of last week's EU summit as time passes. Bond auctions will continue to watched as Italy will sell as maximum of EUR 5b 5 year bonds today while Germany will sell EUR 5b of 2-year notes. EUR/USD is vulnerable to deeper selloff through 1.3 psychological level.

The Fed decided to leave the policy rate and operation twist unchanged. This is expected as recent economic data in the US improved but sovereign debt problems in the Eurozone remained a great uncertainty. Policymakers would prefer to stand on the sideline and monitor the developments for the time being. In the accompanying statement, the Fed changed to a mildly more positive tone amid acknowledgement of positive domestic developments since the last meeting. More in Fed On Hold, Delivers More Upbeat Economic Outlook.

On the data front, China conference board leading indicator dropped -0.1% in October, suggesting rising risk of deeper slowdown in the world's second largest economy. Japan industrial production was finalized at 2.2% mom in October. UK job data will be featured in European session today and is expected to show 13.7k rise in claimant counts in November. Unemployment rate is expected to be unchanged at 8.3% in October. Swiss combined PPI and ZEW expectations, Eurozone industrial production, Canadian leading indicators, manufacturing production and US import prices will be released.

Next to EUR/USD, NZD/USD is so far the weakest pair this week on risk aversion. The sharp decline this week confirmed completion of rebound from 0.7370 at 0.7877 after hitting 55 days EMA. Bias is back to the downside for a test on 0.7370 support. Fall from 0.8842 is likely developing into a double zig-zag pattern with the first set of a-b-c completed at 0.7466. The x finished at 0.8241. Hence, break of 0.7370 will confirm resumption of whole decline from 0.8842 and should target next cluster support at 100% projection of 0.8842 to 0.7466 from 0.8241 at 0.6865, 50% retracement of 0.4890 to 0.8842 at 0.6866.