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EURUSD Slumps as Italy Poses a Real EUR Risk

EURUSD Slumps as Italy Poses a Real EUR Risk

Nick Cawley, Senior Strategist


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EURUSD News and Talking Points

- Italian bond yields at multi-year highs as investors shun Italian risk.

- Upcoming election seen as a referendum on the EUR and Italian democracy.

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EURUSD Continues to Make New Multi-Month Lows

The single-currency continues to fall, driven ever lower by rising Italian bond yields. The political upheaval in Italy, and the very real risk that the upcoming election will be seen as a referendum on the EUR, is dragging the single currency back to multi-month lows. In addition, EURUSD is also being weighed on by a strong US dollar with the dollar basket (DXY) trading at its highest level since mid-November.

Italy will be going back to the voting booths later this year in an attempt to elect a new government and the fear in Brussels is that the vote will be seen as a referendum on Italy’s membership in the EU. On Monday Northern League leader Matteo Salvini said that the new elections “will not be political, but instead a real and true referendum “between people who want a free Italy and those who want to be “servile and enslaved”. Italy is the third largest economy in the eurozone and the eight largest by GDP in the world.

EURUSD continues to fall with the pair approaching the November 7 low at 1.1554. The next level of resistance kicks-in at 1.1427, the double-top made in late June 2017. The recent cluster of lower highs and lower lows continues to paint a negative picture for the pair, although the RSI indicator is currently oversold and may provide a brake against further heavy falls.

The latest IG Client Sentiment Indicator shows retail are 61.9% long EURUSD giving a strong bearish contrarian bias.

EURUSD Price Chart Daily Timeframe (June 2017 – May 29, 2018)

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What’s your opinion on the EURUSD?

Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

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