All eyes on Cyprus in what looks likely to be a nervous pre-weekend session

EUR/USD: 1.2900

Concerns over whether Cyprus will be able to avoid a default, after the ECB gave the government until Monday to agree to the bailout package, before it cuts off all funding, helped keep a lid on the Euro today. Things were not helped by more poor data, where the weaker than expected PMI's from Germany and France ensured that any strength in the Euro would meet plenty of selling interest.
 
The combined news was enough to see another run under 1.2900, (1.2879 low), but corporate demand and short-covering ahead of the technical support lifted trade back above 1.2900.
 
Elsewhere today,  Spain successfully auctioned over Euro 4 billion of bonds for various terms at lower than expected yields but it did little to enthuse buyers of the Euro which has seen a steady flow of funds out of the EU, with the crosses being the main beneficiaries. Aud, Kiwi, Yen and Cable all had good sessions on the back of Euro cross sales.
 
Technically not too much has changed with the Euro sitting close 1.2900. The weeks low at 1.2944 remains intact and the 200 DMA (1.2870) has today helped to prop up the earlier move to the downside.  If we are to make further declines a breakdown would head to 1.2800, but beyond there, there is  little support be found ahead of 1.2680 (61.8% of 1.2042/1.3710).
 
On the topside, 1.2954 has capped it today and we need to get above here in order to approach the strong offers lined up in the 1.2990-00 area. The 4 hour indicators still suggest that this is a possibility, and if taken out , the Euro would head towards the top of the channel (1.3010) and then to the Fib resistance at 1.3044 (23.6% of 1.3710/1.2844). Beyond here would suggest 1.3075, which would allow the gap to Fridays close to be filled. I would no be getting too enthusiastic though given the fundamental outlook in the EU.
 
Today's economic highlight will be the German IFO, but all eyes will be on Europe and Cyprus, where it will be a pretty nervous session heading into the weekend. Without any positive news, it looks as though the pressure will ultimately remain to the downside for the Euro.
 
Economic data highlights will include:
 
German IFO