EUR/USD analysis: Italian rebellion jeopardizes the common currency

Valeria Bednarik FXStreet

EUR/USD Current price: 1.1242

Italian government in no rush to change its 2019 budget.
USD strengthened on risk aversion, triggered by tensions in Italy, no light at the end of the Brexit tunnel.

European currencies led the way higher for the greenback this Monday, with the EUR and the GBP collapsing on political woes. The EUR/USD pair fell to 1.1239 right after London's opening amid mounting tensions about the Italian budget, rejected by the EU commission last week. The troubled country has until this Tuesday to resubmit a fiscal plan that complies with EU rules or could face economic sanctions. Italian PM Conte & Co. were said to meet, but the header was later denied by the prime minister's office, meaning that they don't plan to change a comma of the budget, meant to maintain the common currency under strong pressure. Nor the EU neither the US released macroeconomic data that could interfere with sentiment-related trading. This Tuesday, however, Germany will publish the final October inflation data, seen unchanged at 2.4% YoY and the November ZEW survey, foreseen showing further deterioration in economic sentiment. In the US, a couple of FOMC's members will be on the wires but seems unlikely they will say something relevant.

Meanwhile, equities in Europe attempted a modest advance after the opening but finally gave up to fears ending the day in the red, while Wall Street collapsed, amid sharp losses in the tech sector led by Apple cutting its outlook on mounting worries of slowing demand for iPhone.

Ahead of the Asian opening, the EUR/USD pair trades a handful of pips above a new daily low of 1.1235, with an intraday attempt to recover the upside being capped by sellers around 1.1275, now the immediate short-term resistance. Technical readings in the 4 hours chart favor a bearish continuation for the upcoming sessions, as indicators in the mentioned chart maintain their downward slopes within oversold readings, while the 20 SMA accelerated below the larger ones far above the current level. The daily low is the immediate support, with a break below it opening doors for a downward continuation to 1.1186, June 2017 monthly low. Advances could be considered corrective as long as the price remains now below 1.1335.

Support levels: 1.1230 1.1185 1.1140

Resistance levels: 1.1275 1.1300 1.1335

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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