Cyprus Rejects Bailout, Japan on Holiday

The euro poked below the 200-day moving average after politicians in Cyprus voted against a plan to tax bank deposits. The euro was the weakest performer on the day while the yen rallied. Tokyo is on holiday today so markets may remain rangebound. Premium Insights will be added on Wednesday.

The Eurogroup-mandated bailout for Cyprus was completely rejected by parliamentarians. All opposition policymakers voted against the law and the main governing party abstained.

There is talk about a bailout plan using funds from social security but Eurogroup leader Dijsselbloem said some form of the tax is unavoidable. Leaders of the various parties will meet again Wednesday morning.

The market is fixated on the drama in Cyprus and the euro was jarred by various headlines and rumours but the general theme was lower. A wave of selling hit after the 200-day moving average gave way but dip-buyers ensured EUR/USD closed above the key technical zone, albeit slightly.

With the FOMC meeting Wednesday the risks shift back to the USD side of the equation. Less dovish comments from the Fed could further depress the euro.

With Japan closed for holiday, the market will be focused on some second-tier indicators from Australia. Up first is the Westpac leading index at 1930 GMT, there is no consensus estimate. Thirty minutes later, the reading on skilled vacancies from DEWR for February will be released. In January, the gauge declined 0.7%.