EURUSD

 The euro found support against the U.S. dollar on Wednesday, but remained close to an almost two-year low, after the European Union Commission said that stricken euro zone banks could be recapitalized through the region’s bailout fund.

EUR/USD pulled back from 1.2425, the pair’s lowest since July 1 2010, to hit 1.2466 during European early afternoon trade, still down 0.29% on the day.

The pair was likely to find support at 1.2350 and resistance at 1.2504, the session high.

The EC said that the euro zone was faced with the prospect of "financial disintegration" and should use its permanent bailout fund to recapitalize banks directly, while also moving towards a banking union.

In its report on euro zone economic strategy, the EC also supported the idea of “joint debt issuance” or euro bonds, an idea which has met strong opposition from Germany.

The euro weakened broadly earlier after a poorly received auction of Italian government bonds fuelled fears that the debt crisis in the region is deepening. 

Italy’s Treasury auctioned EUR5.73 billion of 5-and10-year bonds in an auction which met with lackluster investor demand, while borrowing costs rose sharply, indicating that concerns over Spain and uncertainty over the outcome of elections in Greece next month are having a negative impact on Italy.

The euro has come under heavy selling pressure amid concerns over the situation in Spain, where rising bond yields, the growing costs of bank rescues and a recession hit economy fuelled fears that Madrid will be forced to seek an international bailout.

The yield on Spanish 10-year bonds climbed to 6.7% earlier Wednesday, nearing the critical 7% threshold that preceded bailouts in Greece, Ireland and Portugal.


Later Wednesday, European Central Bank President Mario Draghi was to speak, while the U.S. was to release a report on pending home sales