EURUSD Price, Chart and Analysis:
- Relations between Italian Right-wing League and anti-establishment M5S increasingly hostile.
- Political fears on top of economic woes may send EURUSD below 1.1000.
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Italian politics is back in the headlines as deputy prime minister Salvini, head of the League party, has called for a fresh election as his relationship with co-deputy prime minister, M5S leader Luigi Di Maio continues to fall apart. The general unease between the parties has increased over recent months and now Salvini has said that it is ‘pointless’ for the government to continue as it no longer has the backing to survive. If an election were called, Salvini is expected to poll nearly double the votes of the M5S, potentially leaving the League able to govern if it forms an alliance with the far-right Fratelli d’Italia.
The European Union (EU) will be watching the situation in Italy closely with the League’s Salvini constantly locking horns with Brussels over their open-door immigration policy. Salvini has also been vocal about the need for the EU budget to be renegotiated, much to Brussel’s ire.
EURUSD continues to trade around 1.1200 and is finding it increasingly difficult to break higher, despite expectations of further interest rate cuts in the US. The ECB is now expected to cut rates at the September meeting and give details of a new quantitative easing program. A break below congestion between 1.1150 and 1.1160 will open the way for EURUSD to re-test 1.1107 before the August 1 low of 1.1027 comes into play.
EURUSD Daily Price Chart (December 2018 – August 9, 2019)
IG Client Sentiment data shows traders are 55.8% net-long EURUSD, a bearish contrarian bias. The number of traders net-long is 5.2% higher than yesterday and 29.1% lower from last week, while the number of traders net-short is 6.6% lower than yesterday and 47.5% higher from last week. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bearish contrarian trading bias.