Euro gets Smashed as Italy Votes No

The biggest news over the weekend has been the referendum carried out in Italy where the Italians voted on constitutional reforms. The ruling PM Renzi had staked his future on the referendum and the voting was carried out on Sunday. The Italians voted for a resounding No in the referendum and this has forced the PM to resign and has caused turmoil in the third largest economy in Europe. This not only creates a vacuum and confusion on what is to follow, it has also thrown the financial markets in Europe into turmoil as investors are no longer sure of what is going to happen and the stability of the Euro as a whole is in question.

This made the EURUSD push down lower and it is testing the strong support at 1.0550 as of this writing. This region between 1.05 and 1.06 is key and a break below 1.05 would throw open parity and could even lead to a much deeper correction in the euro as the investors start losing confidence and start pulling out. This is something that the region would want at this moment, just when it is preparing itself for the UK to exit.

This result has also led to a general risk-off sentiment in the markets and this has helped to strengthen the yen and the dollar to an extent. We have to see how the European markets react to this news when they open later but we do expect the euro to come under severe pressure during the course of the day and 1.05 could be the key to how the euro moves in the short term.
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