The US Dollar continued scaling higher on Friday and remained supported by firming expectations that the Fed will continue with its gradual monetary policy tightening cycle beyond 2018. The EUR/USD pair extended its rejection slide from the key 1.1500 psychological mark and was further weighed down by the standoff between Rome and Brussels over Italy's budget proposals. Market worries were evident from the widening of the yield spread between Italian government bonds and German bunds, which exerted some additional downward pressure on the shared currency.
The pair witnessed a bearish gap at the start of a new trading week and moved back within striking distance of YTD lows, failing to find some support from news that Italy's Economy Minister Giovanni Tria is considering to tweak the plan by lowering 2019 growth forecast to meet EU budget demand. Italy is requested to submit a revised draft budget plan to the Commission by November 13, i.e. tomorrow. With a holiday in the US and no major market moving releases from the EU, political headlines might continue to influence the pair's momentum and keep a lid on any attempted recovery move.
From a technical perspective, the 1.1300 handle remains a key trigger for bearish traders, which if broken might confirm a near-term bearish breakdown and turn the pair vulnerable to resume with its prior depreciating move. A follow-through selling has the potential to continue dragging the pair and accelerate the fall towards testing sub-1.1200 level (1.1185-80 region).
On the flip side, the 1.1370 area now seems to cap any attempted recovery moves and is closely followed by the 1.1400 round figure mark. Momentum beyond the mentioned hurdles, leading to a subsequent strength above the 1.1425 region, could get extended towards 1.1470 intermediate resistance en-route the 1.1500 round figure mark. Only a convincing breakthrough the said handle might now negate any near-term negative bias and prompt some aggressive short-covering move.
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