EURUSD Hits New 2018 Low on Italian Crisis

The Euro-to-Dollar rate extended losses Tuesday as fears over the Euro’s survival ratcheted higher in response to the latest developments in Italian politics which, according to strategists, now threaten to push the single currency back to levels not seen since the French presidential election of April 2017. The pair hit an intra-day low of 1.1515 and has since seen modest rebound but the pair remains well inside 1.15 handle. The pair trading around 1.1540 at the time of writing this article and is expected to move well inside 1.15 handle across Wednesday’s Asian market hours. The slide in EURUSD pair has boosted demand for EUR puts as investors fear a deeper drop in the EUR/USD spot market. Italy’s political woes extended into the bond markets, with the Italian and German bond yield differential widening to its largest level since 2014. U.S. Treasury notes extended lower, with the 10-year yield declining to around 2.8%.

EURUSD On the Decline

Except for safe haven currencies, US Greenback saw gains against major global currencies on European session yesterday. US Calendar saw mixed outcome on Tuesday with CB consumer confidence taking a bearish hit while HPI composite and Dallas Fed Mfg Business index saw positive data. However Geo political issues in Euro zone and dovish euro zone macro data helped US greenback remain positive across the day. Investors are currently focused on French Preliminary GDP, German Unemployment and retail sales data in European calendar and ADP Non Farm Employment and Preliminary GDP data from US calendar scheduled to release later today.

From a technical perspective, EUR/USD is approaching major support found on larger time frames. The weekly 100-period and 200-period simple moving averages (SMA) are respectively located at 1.1411 and at 1.1432, can become the next targets in the coming days if the bear trend extends further. However we can expect price to consolidate around 1.15 handle if European macro data scheduled for the day has positive results. Expected support and resistance for the pair are at 1.1510 / 1.1470 / 1.1410 and 1600 / 1650 / 1700 respectively.