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Cyprus continues to cap any EUR progress

FXstreet.com (Barcelona) - The bloc currency remains trapped around the proximity of the 200-day moving average on Tuesday, flat-lining in a wait-and-see mode against the backdrop of increasing fragility in the Cypriot front. At the moment, seems that both capital controls and the final levy on deposits above €100K would dominate the headlines in today’s session, as the re-opening of the local banks on Thursday looms.

… Fears of contagion on the rise

The inaction seen in the EUR/USD since 2013 lows on Monday around 1.2830 has extended overnight alongside the lack of news emanating from Cyprus. Furthermore, that scenario remained pretty much unchanged into the European open, as markets seem to favour the isolation against the ongoing rumours that have been dominating the price action as of late.

Nonetheless, the D-Day in Cyprus would definitely be Thursday, when the banking sector meant to re-open its doors to the public. The subsequent reaction of both depositors and banks would be under the microscope, as well as any echo on the Spanish and Italian debt markets – the next victims?.

Anyway, investors’ confidence remains badly hurt and it is posed to keep on taking the brunt of further (surely unpleasant) events in Cyprus. Furthermore, market participants continue to be vigilant, paying close attention to comments by EU and Cyprus’s officials after yesterday unfortunate declarations of Eurogroup’s J.Djisselbloem. After all, words rather than facts have been the main drivers since the crisis in the island aggravated.

In the technical field, the cross returned to trade within the downtrend channel set from February highs, after the attempt to follow through the psychological limestone of 1.3000 on Monday did not prosper. It meanders around the 1.2870/80 region, home of the 200-day moving average and December 2012 lows.
Initial north barrier sits around 1.3075 – Fibonacci retracement of 38.2% of July’12 – February’13 upside – ahead of 1.3107 (March 15th high), If strong impulse persists, then 1.3134 (March 8th high) would be exposed.
Further downside however would expose the region of 1.2660/80, home of the November lows and the 61.8% retracement.

Forex: EUR/GBP rises towards 0.8500 handle after UK CBI data

The British Pound is doing the opposite movement of the Euro, as the first is dropping after testing resistance at 1.5200 and the latter is bouncing after a spike down to 1.2840 low. So, the EUR/GBP is finding room to improvement during the European session. After a low at 0.8460, the cross kept creeping higher and has reached 0.8492 high so far, after the release of UK CBI realized trades data.
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European markets react to Dijsselbloem (North up, South down)

The German DAX 30 (+0.13%) and the French CAC 40 (+0.53%) are up today while the Italian FTSE MIB (-1.35%), the Spanish IBEX 35 (-1.02%) and the Greek ATHEX (-5.36%) fall on Tuesday in reaction to Eurozone President and Dutch Finance Minister Jeroen Dijsselbloem comments, saying that uninsured deposits should contribute to bank rescue before taxpayers. ECB’s Couere replied to Dijsselbloem today, rejecting the idea that the Cyprus bailout is a new model for Europe, adding that there’s no reason to think French banks have the same problem as Cyprus. Also, he indicated that the troubles in Cyprus only show the need for ECB to be independent supervisor of banks in Europe.
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