We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Bitcoin
Mixed
More View more
Real Time News
  • Commodities Update: As of 03:00, these are your best and worst performers based on the London trading schedule: Silver: 0.63% Oil - US Crude: -0.02% Gold: -0.11% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/oNEkMGVhyX
  • Forex Update: As of 03:00, these are your best and worst performers based on the London trading schedule: 🇦🇺AUD: 0.17% 🇨🇦CAD: 0.11% 🇪🇺EUR: 0.07% 🇳🇿NZD: -0.01% 🇨🇭CHF: -0.03% 🇯🇵JPY: -0.04% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/6TDJo3StbI
  • LIVE NOW: Join DailyFX Senior Strategist @IlyaSpivak LIVE as he discusses the outlook for the financial markets in the week ahead! https://www.dailyfx.com/webinars/889679267
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.27%, while traders in Germany 30 are at opposite extremes with 84.48%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/Hp25WV8QCx
  • LIVE IN 30 MIN: Join DailyFX Senior Strategist @IlyaSpivak LIVE as he discusses the outlook for the financial markets in the week ahead! https://www.dailyfx.com/webinars/889679267
  • #NOK, #AUD and #SEK are expected to be the most active G10 currencies vs USD with 1-week implied volatility at 7.35, 7.76 and 6.72, respectively
  • Tune in to @IlyaSpivak 's #webinar at 10:00 PM ET/3:00 AM GMT for insight on the cross market weekly outlook. Register here: https://t.co/E213bTtq5C https://t.co/Mh5NxU5BsU
  • RT @KyleR_IG: * PBOC OFFERS 1-YEAR MLF AT 3.15%, LOWERED FROM 3.25% PREVIOUSLY #ausbiz $cny
  • 🇨🇳 CNY New Home Prices (MoM) (JAN), Actual: 0.27% Expected: N/A Previous: 0.35% https://www.dailyfx.com/economic-calendar#2020-02-17
  • 🇨🇳 CNY New Home Prices (MoM) (JAN), Actual: 0.27% Expected: N/A Previous: 0.4% https://www.dailyfx.com/economic-calendar#2020-02-17
EUR/USD Price Reverses Sharp Decline as Italian Fears Cool

EUR/USD Price Reverses Sharp Decline as Italian Fears Cool

2018-05-30 12:30:00
Christopher Vecchio, CFA, Sr. Currency Strategist
Share:

Talking Points:

- The US Dollar is dropping today as investors are trimming positions taken during yesterday's explosion of concerns regarding Italy.

- A cooling of tensions in Italy - that a populist government wouldn't emerge - has given traders enough of a reason to reverse the Euro's losses for the week.

- Retail traders are short the US Dollar, although positioning has trimmed overnight after the reversal.

Looking to learn more about how central banks impact FX markets? Check out the DailyFX Trading Guides.

DXY Index Rally Stalls Just Short of Key Resistance

The US Dollar (via DXY Index) rally has stopped short of the highs established in November 2017, as a cooling of fears over Italy has generated a significant rebound in EUR/USD. With the Euro constituting 57.6% of the DXY, it is no surprise then that gains have been stunted even as other major pairs (USD/JPY) rally.

The DXY Index uptrend remains healthy, insofar as the key moving average in its uptrend - the daily 13-EMA - has yet to be be breached on a closing basis since April 18. Another attempt at the high at 95.17, established with the bearish outside engulfing bar on July 20, 2017 and subsequent failed retests in October and November 2017, can't be ruled out yet.

DXY Index Price: Daily Timeframe (July 2017 to May 2018) (Chart 1)

EUR/USD Price Reverses Sharp Decline as Italian Fears Cool

Bullish momentum remains firmly in place for the DXY Index, with price above the daily 8-, 13-, and 21-EMAs. MACD and Slow Stochastics continue to trade near overbought territory, suggesting that topside momentum is firm.

A rebound in US Treasury yields might not initially translate into US Dollar gains in the near-term, as investors are simply unwinding positions taken around the spike in Italian government fears. The US Dollar gained as US yields dropped on Tuesday, suggesting the greenback has taken on the role of 'safe haven' more prominently as May comes to a close.

Euro Reverses Losses from Tuesday, Now Positive for the Week

The Euro has been hit hard by the growing contagion coming out of the Italian bond market, where the 2-year yield jumped from 0.50% at the end of last week to a five-year high of 2.84% during the day yesterday. While tensions have eased now that it appears that the populist parties won't be coming together to form a government, and instead, a late-July election looks likely, Italian yields have dropped meaningfully: the 2-year yield was at 2.04% this morning.

The dissipation of tensions in the Italian bond market, coupled with a significant beat on the preliminary May German CPI figures, has proven to be a significant enough set of catalysts to provide the Euro a lift this morning. In fact, the latter of the two catalysts may be enough to sustain a larger Euro rebound in the coming days if Italian fears continue to ease.

EUR/USD Price: Daily Timeframe July 2017 to May 2018) (Chart 2)

EUR/USD Price Reverses Sharp Decline as Italian Fears Cool

EUR/USD had fallen to its lowest level since July 20, 2017 before rebounding today, which puts its squarely in line with swing support established last July, October, and November around 1.1550. Price momentum is firmly negative (EMAs, MACD, Slow Stochastics), and price is treating the daily 13-EMA as the key resistance level in the downtrend.

Read more: US China Trade War & a Brief History of Trade Wars – 1900 until Present

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.