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Breakaway Support for the Italian Coalition Pushes Euro Above the Weekend Gap

Breakaway Support for the Italian Coalition Pushes Euro Above the Weekend Gap

Benjamin Spier, Technical Strategist

Talking Points:

  • 20 members of Berlusconi’s PDL party may breakaway
  • Euro stability possibly contingent on PM Letta surviving a confidence vote
  • EUR/USD closes the weekend gap

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The Euro erased a weekend gap against the US Dollar and gained an additional 35 pips on a headline lending hope to the Italian government maintaining stability.

Reports are circling that as many as 20 Senators from Berlusconi’s PDL party are ready to form a breakaway party, suggesting they would maintain support for PM Letta’s coalition. This news follows a late Friday announcement that Berlusconi pulled his party’s ministers from the cabinet, casting doubt on PM Letta’s ability to survive a confidence vote that will take place this Wednesday. Berlusconi was threatening to withdraw his support for the coalition after legal problems have led the right wing leader to face a possible Senate expulsion.

Letta needs a faction of Berlusconi’s party to breakaway or for additional support from opposition Senators to win the upcoming confidence vote. A breakup of the current coalition is possibly Euro negative, as it could lead to the election of a less austerity-prone government, which could drive up the yields on government bonds and create Euro-zone instability.

The Euro continues to trade slightly below 1.3550 against the US Dollar, and the pair may see resistance by a nine month high at 1.3568. A broken resistance line around 1.3400 may now provide support.

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EUR/USD Daily: September 30, 2013

Breakaway_Support_for_the_Italian_Coalition_Pushes_the_Euro_Above_the_Weekend_Gap_body_Picture_1.png, Breakaway Support for the Italian Coalition Pushes Euro Above the Weekend Gap

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

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

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