• EU rejects Italy’s revised budget but does little to influence the price action.
• Rumours that the Fed might pause in spring 2019 prompt some fresh USD selling.
• Further gains remained limited ahead of the US durable goods orders data.
The EUR/USD pair reversed a last hour dip to the 1.1370-65 region and rallied over 50-pips to refresh session tops, albeit quickly retreated few pips thereafter.
After a rather muted reaction to the latest news, saying that the European Commission has rejected Italy's revised budget proposal, a fresh wave of US Dollar selling pressure helped the pair to regain positive traction and spike back above the 1.1400 handle.
Against the backdrop of easing global risk-aversion trade, the greenback was further weighed down by rumours of Fed possibly pausing the rate hike cycle as early as in spring 2019. With no official sources confirming the headlines, traders interpreted the story with caution and refrained from placing any aggressive bullish bets.
Adding to this, prospects for a further escalation of the standoff between Rome and Brussels, especially after Senior Lawmaker D’Uva reiterated that 5-Star will not go back on budget, might continue to dent sentiment surrounding the shared currency and keep a lid on any meaningful near-term up-move.
Moving ahead, market participants now look forward to the US economic docket, highlighting the release of durable goods orders, for fresh impetus and in order to grab some short-term trading opportunities.
Technical levels to watch
Any subsequent up-move is likely to confront some fresh supply near the 1.1450 horizontal zone, above which the pair is likely to make a fresh attempt towards reclaiming the key 1.1500 psychological mark.
On the flip side, the 1.1370-65 region might continue to act as an immediate support, which if broken might turn the pair vulnerable to accelerate the slide further towards the 1.1300 round figure mark.
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