EUR/USD Daily Price Forecast – EUR/USD Failed To Hold Above 1.16 over Italian Budget ConcernsThe EUR’s repeated failure to climb 1.16 is a slight cause for concern for the EUR bulls.
The EUR/USD may feel the pull of gravity in European market hours as the Italy-German yield differential may rise in the EUR-negative manner, courtesy of Italy’s expansionary fiscal policy. Italy’s government approved a draft budget law in later hours on Monday, under which the budget deficit is set to widen to 2.4% of the gross domestic product, in defiance of EU rules that require a shrinking deficit. Further, the EUR officials fear that the real deficit could go much higher than 2.4%.As a result, the spread between Italy and German 10-year government bond yields, which has already risen to five-year highs above 300 basis points, could rise even further, sending the EUR lower. As of writing this article, the EURUSD pair is trading at 1.575 down by 0.04% on the day.
European Macro Data To Act as Key Factor in EUR’s Momentum Today
The Euro saw a firm recovery in Monday’s action after a bearish start to the trading week, and a softening of Greenback buyers’ positions has helped the pair reverse recent bearish action to push back into bullish turf. European Trade Balance data will be dropping later today, but the low-tier indicator is unlikely to have a significant impact as Italy headlines continue to dominate the EUR space. However the bearish pressure around the EUR could strengthen if the German ZEW surveys, scheduled for release at 09:00 GMT, prints below forecast. On other side of Atlantic, US markets will see release of JOLTs Job Openings, Industrial productions and Manufacturing Production data.
Technically speaking, the EUR/USD’s persistent failure to scale the psychological hurdle of 1.16 in the last three trading days indicates that the corrective rally from the recent low of 1.1432 has likely run out of steam. In the 4 hours chart, the pair was unable to sustain gains above a bearish 100 SMA, but trades above a bullish 20 SMA, with the strong upward slope of the shortest maintaining the risk skewed to the upside. Technical indicators in the 4 hour chart held into positive ground, but lacks directional strength. Expected support and resistance for the pair are at 1.1560, 1.1530, 1.1500 and 1.1620, 1.1660, 1.1700 respectively.