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EURUSD Analysis: Short-Term Support Appears, Italy's Knuckles Rapped

EURUSD Analysis: Short-Term Support Appears, Italy's Knuckles Rapped

2018-09-03 08:00:00
Nick Cawley, Strategist
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EURUSD – Price, Chart and Technical Analysis

  • EURUSD finding support on the four-hour chart.
  • Italian sovereign rating unchanged but outlook lowered.

The latest IG Client Sentiment Indicator shows how retail are currently positioned in EURUSD - 43.3% net-long – normally a bullish contrarian set-up. However recent positional changes warn that prices may soon reverse lower despite retail remaining net-short.

The DailyFX Q3 forecasts and analysis of USD and EUR are just two of the major currencies available to download here.

EURUSD Finding Short-Term Technical Support for Now

In what is expected to be a quiet session due to the US Labour Day Holiday, EURUSD currently sits on a noted technical support level and looks weak in the short-term. Trading ranges are expected to be narrow today, so a break lower may not occur soon, but technical indicators currently point to a lower price.

As seen on the four-hour chart below, EURUSD currently trades just above the 200-day moving average at 1.15852 and has held this level for the last five candles. The pair also trade below the 20- and 50-day moving average and remain at, or near, levels seen 10-days ago. The RSI indicator is back at a two-week low and just trading above oversold territory which may provide the pair with some short-term support.

EURUSD Four Hour Price Chart (July 26 – September 3, 2018)

EURUSD Analysis: Short-Term Support Appears, Italy's Knuckles Rapped

Italian Sovereign Rating Unchanged but Outlook now Negative

Late last week, rating’s agency Fitch left Italy’s credit rating (BBB) untouched but lowered its rating’s outlook to negative from stable. The agency said that they expect a ‘degree of fiscal loosening that would leave Italy’s very high level of public debt more exposed to potential shocks'. This warning from Fitch was followed by commentary from the Italian economy minister who said that they would come up with concrete policies to help them to respect their European Budget Commitments.

Italian government bond yields remain elevated with the 2-year quoted at 1.45% and the 10-year offered at 3.20%, a level last seen in mid-2014.

DailyFX analyst Dimitri Zabelin has produced a timely and concise report on How the Euro will be Affected by the Rise of Italian Economic Nationalism.

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 Italy? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com 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.

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