EUR/USD Daily Price Forecast – EUR/USD Moves Range Bound on Italian Uncertainties As US Holiday Kept Volume Thin On Monday

Activity was quite limited through financial boards at the beginning of the week amid a combination of a US holiday and uncertainty about a possible escalation of the US-China trade war. The EUR/USD traded around the 1.1600 level, hitting a daily high of 1.1627 and closed for the day at 1.1614 up 0.14% on the day. The final versions of August Markit PMI confirmed that manufacturing activity in the European Union slowed down, with the index coming in at 54.6, the slowest growth rate since November 2016. Moving forward the market is expected to see good volatility over news filled trading sessions across the week. Some of key factors that investors are on lookout for include Italian budget updates, Brexit proceedings, US NFP data and President Trump’s threat to implement tariff on China for $200 Billion worth goods. As of writing this article, the pair is trading at 1.1604 down 0.14% on the day.

Investors Focus is on Italian Budget Updates from Talks between Senior Leaders Scheduled Later Today

On release front today, the EU will release July PPI and the US the final manufacturing PMI, the official one seen revised lower to 57.7 from 58.1 and the Markit one seen unchanged at 54.5. While Brexit proceedings have been a thorny issue for EU, the proposed deal faces challenges from both sides however the key focus of investors today remains on Italian budget news. Markets await discussions amongst Italy’s political leaders tonight regarding the budget situation. Senior leaders from League will meet to discuss the policies they plan to include in the 2019 budget and their impact on the fiscal position. League leader and Deputy Prime Minister Salvini has signaled that Italy’s budget deficit could touch the European Union’s 3% limit on the back of promised tax cuts and new spending.

Investors are focusing on budget updates to see the degree to which Italy’s leaders plan to push the European Union’s budget rules, given Italy’s already huge levels of government debt as news on same will give an idea on how much the decision will affect Euro’s momentum in short & medium term markets. Euro bulls are expected to see some activity ahead of US NFP data as US macro data forecast for releases ahead of NFP seems slightly dovish. The short-term technical picture is neutral-to-bearish, as, in the 4 hours chart, the pair is also developing below a bearish 20 SMA, while technical indicators remain within negative territory, the Momentum attempting to advance but the RSI regaining the downside at around 43. The pair bottomed Friday at 1.1584, where the pair also has the 200 SMA, with a break below it favoring another leg lower toward 1.1550, a likely scenario should risk aversion persists. Bulls, on the other hand, will remain cautious as long as the pair trades below the 1.1700 level. Expected support and resistance for the pair are at 1.1585, 1.1550, 1.1510 and 1.1630 1.1660 1.1695 respectively.