-- Euro trades back below $1.22 as reported ECB shift on bank bailouts weighs -- Delay in German constitutional court ruling adds to uncertainty -- But market moves limited as traders await Bernanke's testimony Tuesday -- U.S. earnings season kicks off in earnest, Citigroup due at 1200 GMT By Jessica Mead The euro was pressured in European trading Monday as traders took fright at the possibility of losses being imposed on Spanish bank-debt holders. Dollar buying was limited as investors awaited a key policy update from the Federal Reserve chairman. Europe's common currency traded below $1.22 against the dollar and sank to its lowest level since October 2008 against the pound and to a six-week low against the Japanese yen. The Wall Street Journal reported a shift in stance at the European Central Bank on how best to rescue struggling euro-zone banks, specifically in Spain, with the ECB seemingly now advocating the imposition of losses on senior bondholders. That helped push up yields on Spanish and Italian government bonds and lifted the cost of insuring European corporate debt against default, although the moves were modest. "We will just get continuing noise out of the various euro-zone states on the shape that the Spanish bailout should take. There are also plenty of unanswered questions and the risk is that this public debate could weigh on the euro," said Adam Cole, chief currency strategist at RBC Capital Markets in London. Adding to a sense of disappointment was news the German constitutional court will also not announce its ruling on the country's ratification of the European bailout fund and fiscal pact until Sept. 12. The euro traded as low as $1.2183 but a sharp selloff did not materialize as investors awaited key testimony from Fed chief Ben Bernanke Tuesday and a slew of U.S. earnings releases. Citigroup Inc. (C), the world's second-biggest currencies dealing bank, will publish its second quarter results at around 1200 GMT "We are now entering the thick of the U.S. earnings season this week. That should set the tone for [investor sentiment] which is one of the usual drivers for most of the major currencies," Mr. Cole said. He added renewed dollar strength may be seen if Bernanke shies away from signalling another round of quantitative easing. In emerging markets, the Indian rupee was weaker against the dollar after Indian inflation slowed to its weakest level in five months, giving the central bank space to ease monetary policy. "The unexpected slowdown of inflation (in India) is fantastic news, despite the still elevated level. It opens the door for a rate cut already in July, and we expect a 25-basis-point move at the RBI meeting at the end of the month," said Dariusz Kowalczyk, a senior economist and strategist at Credit Agricole CIB. RBI is the Reserve Bank of India. U.S. June retail sales data due at 1230 GMT are expected to show that overall sales rose 0.2% on the month. The International Monetary Fund will also publish an update to its economic growth forecasts at 1330 GMT. At 1018 GMT, the euro was trading at $1.2191 against the dollar, compared with $1.2250 late Friday in New York, according to trading system EBS. The dollar was at Y79.00 against the yen, compared with Y79.20, while the euro was at Y96.29 compared with Y96.98. Meanwhile, the pound traded at $1.5534 against the dollar, compared with $1.5570 late Friday in New York. The ICE Dollar Index, which tracks the greenback against a basket of currencies, was at 83.563 compared with 83.297 late Friday in New York. A summary of key levels for chart-watching technical strategists is below: Forex spot: EUR/USD USD/JPY GBP/USD USD/CHF Spot 1052 GMT 1.2188 79.00 1.5542 0.9853 3 Day Trend Bullish Bearish Bullish Bearish Weekly Trend Bearish Bearish Bearish Bullish 200 day ma 1.3055 79.63 1.5781 0.9278 3rd Resistance 1.2334 79.97 1.5721 0.9920 2nd Resistance 1.2275 79.40 1.5628 0.9887 1st Resistance 1.2239 79.29 1.5593 0.9872 Pivot* 1.2223 79.22 1.5522 0.9826 1st Support 1.2178 78.79 1.5508 0.9785 2nd Support 1.2162 78.61 1.5431 0.9738 3rd Support 1.2151 78.10 1.5393 0.9679 Forex spot: EUR/CAD Spot 1052 GMT 1.2374 3 Day Trend Bearish Weekly Trend Bearish 200 day ma 1.3156 3rd Resistance 1.2572 2nd Resistance 1.2492 1st Resistance 1.2446 Pivot* 1.2414 1st Support 1.2334 2nd Support 1.2074 3rd Support 1.2000 Write to Jessica Mead at jessica.mead@dowjones.com (Anant Vijay Kala in New Delhi and Dow Jones Technical Strategist Francis Bray contributed to this story.)
