EURUSD Remains Technically Weak Despite Italian Budget Chatter
Euro, US dollar and Italian Government Bond Yields Talking Points:
- EURUSD below all three moving averages.
- Italian government bond yields nudge lower.
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EURUSD Nudges Higher but Move Looks Suspect
EURUSD has bounced back off yesterday’s 1.15050 low and is heading back towards 1.1600 on a newspaper report that the Italian government plans to reduce its budget deficit to 2% in 2021 after announcing last week that the deficit would be 2.4% for the next three years. This caused concern higher up in the EU who warned Italy to trim its deficit targets. Italian bond yields soared to multi-year highs yesterday on the news as investors fled Italian assets.
Italian government bond yields are lower today on the news, but the move is far from convincing. 10-year bonds yield 3.32%, down from a multi-year high print of 3.46%, while the 10-year Italy/German spread has narrowed back to around 290 basis points from 300+ on Tuesday. 10-year Italian bonds traded with a yield around 2.70% three weeks ago.
On the daily chart, EURUSD continues to find resistance from the 50-day moving average at 1.15947, followed by the 20-day ma at 1.16640. Above here the Fibonacci resistance (38.2%) comes into play at 1.1710. On the downside, support remains at 1.15081 for the time being, although a break and close below would open up 1.14480 (50% Fib) ahead of 1.1301.
IG Client Sentiment Datashows that traders are 54.3% net-long EURUSD. Recent daily and weekly changes show longs are increasing giving us a stronger bearish contrarian trading bias. See how this sentiment data can help you in your decision making process.
EURUSD Daily Price Chart (February – October 3, 2018)
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