Italy remains a concern for the Euro


European stock markets head south, led by Italy. The political evolutions in Italy, where anti-establishment parties are forming a government, looks likely to continue to stress market sentiment about the Eurozone.  Italy’s populists, which are heading for power, may have dropped the demand for a debt write off, but still remain on collision course with the ECB and Eurozone and EU peers. The Italian MIB lost a further -1.22% this morning and is at one months lows amid political jitters.

Reportedly the draft government program contains demands that debt purchased under the QE program at the very least should count towards the total debt of a country. At the same time the draft seems to call for a review of Italy’s contribution to the EU budget with the goal of “making it compatible” with the government’s economic and fiscal plans. And these will cost a lot as they include the pledge of a “citizen’s income” for the poor as well as the abolition of the previous pension reform, which raised the retirement age. Tax cuts with two rates of just 15% and 20% as well as an “immediate withdrawal” of sanctions against Russia and strong curbs on immigration are also in the agenda.

The GER30 is down -0.11%, the UK100 lost -0.06% so far. The EUR is below 1.18 against the dollar, Sterling also declined, but for once this hasn’t lifted the mood on stock markets, despite a pull back in long yields. Political jitters overshadowed the data calendar, which included German PPI numbers as well as Eurozone trade and current account data. Eurozone sa current account narrowed to EUR 32.0 bln in March from EUR 36.8 bln in the previous month. The three months trend average declined to EUR 36.2 bln from EUR 36.9 bln in the three months to February. The details show slight improvements in goods trade and services balances, but the surplus in the primary income balance declined, as did the secondary income balance.

The GER30 tried to move higher as the EUR weakened, but struggled. The biggests gainers against Euro so far today are Swissy and Kiwi. The EURCHF has been seen in a bearish move the last 6 consecutive days, with Daily low Bollinger Bands extending their patterns to the downwards, since Tuesday. The pair manage to break today below the 38.2% Fibonacci retracement level set since February’s rally, while it is currently traded below the S2 at 1.1778. The Daily picture of the pair continues to presents weakness, since the price action is below 20 and 50 Day EMA, while  RSI fall to 34 and MACD line moves below the trigger line.

In the 4-hour chart, is more of the same, as 50-period EMA crossed below 200-period EMA,  which implies a confirmation of further down movement in short-term. The RSI just crossed into oversold area, MACD holds above its trigger line but remains in the bearish threshold. The ATR indicator slopes positively above 25, while -DI moves above +DI line, suggesting further negative momentum for the near future. Hence immediate support comes at the confluence of the lower Bollinger Band and the swing low, at 1.1760. The next immediate support levels are at the confluence of 50% Fibonacci level and 20-DAY MA, at 1.1725 and at 1.1690.

Meanwhile, EURNZD formed a heads and shoulders pattern in the 4-hour chart, while it is currently  traded below the neckline of the pattern at 1.7050, which is also the 200-period EMA. Hence a closing of this candle below 1.7050, will triggered a short position, with target at the round 1.7000.



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