Dec 27 (Reuters) - German Bund futures opened higher on Tuesday, with investors likely to focus on an Italian auction of up to 8.5 billion euros worth of government debt later in the week. UK markets were closed and trade was expected to remain choppy throughout the week. Italian 10-year bond yields were last quoted around the psychological 7 percent level, above which yields in countries like Greece, Portugal or Ireland accelerated their rise, eventually forcing the sovereigns to seek bailouts. Supply pressures will dominate trading in Italy early next year as well, when the country faces large debt redemptions. At 0710 GMT, Bund futures were last 68 ticks higher at 138.23, with 10-year cash yields down 6 basis points at 1.896 percent. The 38 percent Fibonacci retracement of the November-December rally at 136.72 was expected to offer strong support for Bunds, with December's high at 138.86 the next target on the upside, technical analysts say.

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