* Bunds dip, bearish technical bias seen * Merkel's pro-Draghi comments support global shares * Limited scope for Spanish yields to fall By Ana Nicolaci da Costa LONDON Aug 17 (Reuters) - German Bunds dipped on Friday as a rally in European stocks took momentum out of the safe-haven debt market, with technical factors likely to dominate until September, when a policy response to the euro zone debt crisis is expected. European shares hit a five-month high on Friday after German Chancellor Angela Merkel voiced support for the European Central Bank's crisis-fighting strategy, underscoring attempts by policymakers to show a united front. But mixed messages from Finland and comments from Austria's foreign minister implying Greece should be kicked out of the euro zone underlined the political challenges the region still faces. Ten-year German government bond yields were up 1.2 basis points at 1.54 percent and technical charts suggested the grind higher had a bit further to run, analysts said. "With this 1.50 percent taken out, I wouldn't be surprised to see 10-year Bund yields edging a bit higher towards 1.60-65, not necessarily today but that would be an intermediate target for next week," Rainer Guntermann, strategist at Commerzbank said. "At that level, they should start to look a little more attractive ... going into September." Credit Suisse technical analysts saw an immediate bearish bias for German debt towards 1.63 percent in the yield and expected fresh buyers only at 1.69-1.70 percent. German Bunds were 14 ticks lower at 141.64, having rebounded in the previous session. Credit Suisse looked for further weakness to 140.18 - a 200-day moving average. HEADLINE RISK Merkel voiced support for ECB chief Mario Draghi, who came under withering criticism in Germany for pledging in a speech in London last month to do whatever it takes to save the euro, and raising the prospect of buying the bonds of stricken euro states like Spain and Italy. She said Draghi's declarations were "completely in line" with the approach taken by European leaders. [ ID:nL2E8JG8KL] The Bund future has come off more than 3 full points since Draghi made his comments, while Spanish and Italian government bond yields have also eased sharply. Ten-year Spanish government bond yields were down 4.9 basis points on the day at 6.53 percent while Italian yields were flat at 5.81 percent. "I don't think that there is potential for (Spanish) yields to decline significantly but at least there is no more deterioration in the area above 7 percent," Patrick Jacq, European rate strategist at BNP Paribas said. "The market is positioned for a constructive decision (by the ECB). Of course this means if there is no delivery then there could be a very negative reaction." Merkel's comments were somewhat overshadowed by mixed signals out of Finland and opposition at home on news some lawmakers in her coalition are demanding a reform of the ECB's voting system to strengthen Germany's influence. Finland is "100 percent committed" to the euro, its European Affairs minister said on Friday, after the country's foreign minister said Finnish the currency's possible collapse. officials have prepared for In Vienna, Austria's foreign minister said countries that fail to keep their financial promises should be thrown out of the euro zone, adding that countries including Germany would support the idea. Draghi has said any ECB intervention will be subject to euro zone governments asking for help first. This has fuelled some concerns in the market that the situation in Spain and Italy has to deteriorate before they open the door for ECB bond-buying. "There doesn't seem to be any sign of Spain wanting to ask for bailout so any talk of ECB buying is a bit premature," one trader said.

Source