- EUR/USD ticked higher in Asia as EUR/JPY cheered renewed US-China trade optimism.
- The gains, however, will likely be short-lived if Italy resubmits a high-spending budget to the EU today.
The EUR/USD pair found bids in Asia, courtesy of renewed US-China trade optimism, however, sustainability of corrective rallies, if any, is under question as Italy is expected to resubmit a largely unchanged and a high-spend budget to the European Union today.
Risk-on could trigger a recovery rally in the EUR
The S&P 500 futures picked up a bid in Asian and are currently reporting 0.6 percent gains. Meanwhile, the anti-risk Japanese yen is being offered. The market action indicates that the risk is being bought on easing trade tensions.
As a result, the European stocks may get off to a positive start, helping the EUR/USD regain some poise. The relief rally, however, could be a short one as Italy and Rome are likely to remain at odds over the budget deficit.
Italy to resubmit budget proposal today
The European Commission rejected Rome's budget outright last month - a first in the history of the European Union - gave Italy until to make necessary changes. In particular, the commission wants Rome to work on control the deficits.
Italy, however, continues to be adamant in stating that attempt to reduce the deficit to the previous goal of 0.8 percent of GDP would be "suicide".
So, it appears the troubled nation would resubmit a largely unchanged and big-spend budget to the EU, pushing the spread between the Italian 10-year government bond yield and its German counterpart to the recent high of 325 basis points. As of writing, the spread is seen at 306 basis points.
Technicals are biased bearish
The pair fell to 1.1215 yesterday, bolstering the already bearish technical setup, as represented by the series of lower highs, acceptance below the 50-month simple moving average (SMA), and the downward sloping 5-, 10-day SMAs.
To sum up, the path of least resistance is on the downside. The bearish pressure would weaken if the pair somehow finds acceptance above the 10-day SMA.
EUR/USD Technical Levels
EUR/USD
Overview:
Last Price: 1.1246
Daily change: 12 pips
Daily change: 0.107%
Daily Open: 1.1234
Trends:
Daily SMA20: 1.1408
Daily SMA50: 1.1532
Daily SMA100: 1.1574
Daily SMA200: 1.1835
Levels:
Daily High: 1.1334
Daily Low: 1.1234
Weekly High: 1.15
Weekly Low: 1.1316
Monthly High: 1.1625
Monthly Low: 1.1302
Daily Fibonacci 38.2%: 1.1272
Daily Fibonacci 61.8%: 1.1295
Daily Pivot Point S1: 1.12
Daily Pivot Point S2: 1.1167
Daily Pivot Point S3: 1.11
Daily Pivot Point R1: 1.13
Daily Pivot Point R2: 1.1367
Daily Pivot Point R3: 1.14
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