EUR/USD Falls To Year's Lows, EUR/AUD At Record Lows

The EUR/AUD cross fell to record lows in Tuesday's U.S. market session, dropping below the dreaded 1.20 level. Euro weakness was also seen in the EUR/USD, as the pair continues to trade near the year's lows.

The euro has seen weakness over the past few trading days because of increasing concerns over the mechanics of the Spanish bank bailout. Recent headlines have indicated that the European Stability Mechanism (ESM), the permanent bailout fund, will not be ready to send funds until at least 2013. The delay in payments from the ESM likely caused the rally seen after the European summit fade in euro crosses.

As Adam Button of ForexLive noted, even though the EUR/USD rallied nearly 300 pips on the news, the CFTC only reported a 9 percent reduction in the net euro short position. He said that the pair's inability to bounce further is proof that it, as with the euro overall, is in a true bear market.

Button posits that rallies should be sold into. Traders who agree with his thesis could look to short the EUR/USD on breaks back to resistance in the 1.2320/1.2330 range. Analysts at Bank of America agree, saying that a 20 percent reduction in the euro would benefit ailing European economies. The bank sees the EUR/USD at 1.20 in the near term and 1.10 over the next six months.