Forexpros – The broadly weaker euro declined against the U.S. dollar in thin trade on Thursday, falling to he lowest level since September 2010 as lingering fears over the euro zone’s debt crisis continued to dampen sentiment on the single currency.
EUR/USD hit 1.2858 during European afternoon trade, the lowest since September 14, 2010; the pair subsequently consolidated at 1.2868, dropping 0.56%.
The pair was likely to find short-term support at 1.2828, the low of September 14, 2010 and resistance at 1.3079, the previous day’s high.
Trading volumes remained light following the Christmas break, as many traders have closed books before the end of the year, reducing liquidity in the market and increasing volatility.
The euro came under broad selling pressure after Italy’s Treasury sold EUR7 billion of long-term debt maturing between 2014 and 2022, below the maximum target of EUR8.5 billion.
The country sold EUR2.5 billion of 10-year bonds, maturing in March 2022, at an average yield of 6.97%, down from November’s euro-record high 7.56%. The country also auctioned EUR2.5 billion of three-year bonds, at an average yield of 5.62%.
Following the auction, the yield on Italy’s 10-year bonds traded at 7.1%, above the critical 7% threshold widely seen as unsustainable in the long-term.
The auction was seen as the first test of European banks’ willingness to purchase long-term sovereign debt of distressed euro zone countries, following last week’s nearly EUR500 billion cash infusion by the European Central Bank.
Adding to concerns, the European Central Bank said earlier that overnight deposits at its lending facility totaled EUR436 billion, down slightly from a record-high EUR452 billion the previous day, underscoring European banks’ nervousness to lend to each other.
The euro was also lower against the yen, with EUR/JPY falling 0.71% to trade at a 10-year low of 100.14.
Later in the day, the U.S. was to release a weekly government report on initial jobless claims, as well as industry data on pending home sales and business conditions in the Chicago area.
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