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EURUSD Price Analysis: Rising Italian Bond Yields May Weigh on EUR

EURUSD Price Analysis: Rising Italian Bond Yields May Weigh on EUR

Nick Cawley, Senior Strategist
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EURUSD – Price, Chart and Technical Analysis

  • Euro Dollar nears one-month high, but price action limited.
  • Italian 10-year bond yields hit a multi-year high as Italy plays tough on immigration.

The IG Client Sentiment Indicator shows how retail are currently positioned in EURUSD and how daily and weekly positional swings affect trader sentiment.

The DailyFX Q3 forecasts and analysis of USD and EUR are available to download here.

EURUSD Watching Italian Political Developments Closely

Euro Dollar traders will need to watch political developments in Italy closely, especially ongoing budget and immigration negotiations. The ruling Italian coalition remains at loggerheads over whether the country will comply with the EU’s 3% of GDP deficit rule, while Italian Deputy PM recently said that the country may not sign-off the EU’s seven-year budget plan unless the current immigration situation changes.

Italian 10-year government yields – a political risk barometer – continue to move higher and are now nudging levels last seen back in May 2014. In contrast, German 10-year bonds offer just 0.38%, French 10-years yield 0.70%, while Greek 10-years are quoted at 4.18%, albeit in a thin market.

EURSUD Heading Towards Resistance - A Break Offers Further Upside

EURUSD is nearing important chart resistance levels and is edging towards overbought territory after the 4-cent rebound seen in the last two weeks. The 38.2% Fibonacci retracement of the January 2017 – February 2018 rally is at 1.1710, while the November 2017 swing-low cuts across at 1.17175. The RSI indicator is at a six-month high and nears overbought territory. Bullish euro dollar traders can take strength from current price action above both the 20- and 50-day moving average and a strong break above the previously noted resistance levels would leave 1.19155 and 1.20330 (23.6% Fib retracement) as near- to medium-term targets.

EURUSD Daily Price Chart (February – August 28, 2018)

On the right-hand side of the pair, the US dollar is off its best-levels of late as traders try and balance future rate hike expectations and fears that the hot-handed US Economy may have outrun the pack with little gas left in the tank”. If rate expectations are pared back further – a 0.25% hile in September is priced in but December’s hike is now looking more evenly balanced – EURUSD may well push aside Italian risk and continue to move higher.

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on EURUSD and the Italian political scene? 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.