EUR/USD inches closer to critical 1.13 mark on broad-based USD strength

After moving sideways in a relatively tight range near the 1.3150 mark, the EUR/USD pair met a short-lasting selling pressure in the last hour and extended its daily fall to a new 8-day low of 1.1315 before staging a modest rebound. As of writing, the pair was trading at 1.1335, losing 0.25% on a daily basis.

The pair's recent drop seems to be caused by the end-of-week flows into London fix. With the Fed not voicing any concerns over the recent market volatility and the flattening yield curve in its policy statement yesterday and reassuring the markets that there was no reason to delay the December hike, the US Dollar Index started to erases the losses it suffered following the midterm election outcome. Additionally, today's PPI reading, which showed a higher-than-expected increase in October, provided an additional boost to the buck. At the moment, the index is up 0.27% at 96.90, and not too far away from the weekly high that it set at 97.01 earlier in the session.

Meanwhile, while speaking to reporters today, Italy's Finance Minister Giovanni Tria reiterated that the key points of their 2019 budget proposal would remain unchanged and that Italy was not the only EU country breaking the EU fiscal rules, to suggest that the Italian budget crisis is not likely to be resolved any time soon. "The Italian coalition was elected to boost the country's struggling economy. Italy's 2018 GDP is 1.13%, the EMU's 2.1%, in 2017 it was 1.45% and 2.38%.  The EU is threatening fines. What is worth more, an extra 0.5% or 1% growth in the  $2.2 trillion Italian economy or EU fines?" said FXStreet senior analyst Joseph Trevisani.

Technical levels to watch for

1.1300 (October 31 low/Aug. 15 low/2018 low) remains as the next critical support. With a decisive break below that level, the pair could target 1.1235 (Jun. 5, 2017, low) on the downside ahead of 1.1200 (psychological level). Resistances, on the other hand, are located at 1.1400 (20-DMA), 1.1500 (psychological level/Nov. 7 high) and 1.1560 (100-DMA).