EUR/USD: Focus on Fitch's assessment of Italy's credit worthiness and Eurozone inflation

Italian bond yields spiked on Thursday on fiscal concerns, dragging the EUR lower with it.
The Italy-Germany bond yield spread could rise sharply in an EUR-negative manner if ratings agency Fitch downgrades Italy.
A better-than-expected Eurozone August preliminary inflation figure would be good news but could be overshadowed by the jittery Italian bond markets.

Omkar Godbole FXStreet Contributor

The EUR/USD created a bearish outside-day candle on Thursday as investor concerns over Italy's fiscal health resurfaced, pushing the government's borrowing cost to multi-year highs.

At press time, the pair is trading at 1.1665. A close today below 1.1642 (previous day's low) would a bearish outside-day reversal, meaning the rally from the 1.1301 has ended and would open up downside towards 1.1530 (Aug. 23 low).

On the other hand, a daily close above 1.1718 (previous day's high) would signal a continuation of the rally from the recent low of 1.1301.

The pair may suffer a bearish reversal if the ratings agency Fitch downgrades Italy, citing fiscal concerns, sending the 10-year Italy-Germany bond yield differential to fresh five years.

On the other hand, the yield differential could narrow sharply, helping the EUR regain yesterday's losses if Fitch keeps Italy's ratings unchanged. A better-than-expected Eurozone August consumer price index (CPI), due for release at 09:00 GMT, could only add to the positive tone around the common currency.

EUR/USD Technical Levels

Resistance: 1.1718 (previous day's high), 1.1791 (July 9 high), 1.1852 (June 14 high)

Support: 1.1642 (previous day's low), 1.1510 (May low), 1.1301 (Aug. 15 low)

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

GBP/USD flies to two-week highs, targets 1.3400

GBP/USD trades well above the 1.3300 barrier on Thursday as the Greenback comes under renewed selling pressure following a softer-than-expected US NFP report in June. Meanwhile, Cable extends its multi-day recovery and looks to challenge 1.3400 sooner rather than later.

EUR/USD: Signs of life emerge above 1.1400

EUR/USD leaves behind two daily pullbacks in a row and advances to multi-day peaks near 1.1470 on Thursday, partially offsetting the sharp decline in place since June. The pair’s decline follows the intense retracement in the US Dollar, which is particularly sponsored by disheartening prints from June’s Payrolls and the sharp sell-off in USD/JPY. The US markets will be closed on Friday due to the Independence Day holiday.

Gold hits six-day tops past $4,100

Gold extends its bullish momentum on Thursday, climbing above the $4,100 mark per troy ounce to reach its highest level in a week. The precious metal’s sharp rebound comes as the US Dollar retreats following disappointing US NFP data.

Strategy's STRC volatility points to late Bitcoin cycle reset — Bitwise

The recent volatility surrounding Strategy's perpetual preferred stock, STRC, could signal that Bitcoin (BTC) is approaching a cycle bottom, according to Bitwise CIO Matt Hougan. In a Wednesday report, Hougan argued that the sharp decline in STRC and Strategy's MSTR stock should be viewed as "classic end-of-cycle dynamics" rather than evidence of a broader structural threat to Bitcoin.

The market may no longer be giving the Magnificent Seven a free pass

For much of the past three years, investing has felt surprisingly simple. Whenever markets stumbled, investors knew where to look. Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta and Tesla repeatedly led Wall Street higher, shrugging off inflation fears, higher interest rates and geopolitical shocks.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.