(MENAFN- DailyFX) EURUSD News and Talking Points
- Italian bond yields highlight real EUR risk.
- USD pauses before the next move higher.
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EURUSD Pauses for Breath Ahead of Further Falls.
A combination of heightened Italian risk and a rampant USD continues to force EURUSD lower with the pair hitting the lowest level since mid-December yesterday. While the US dollar has come off its recent highs, after rallying by nearly 6% in just over a month, the trend higher remains intact. And in the case of the EUR, real political risk remains as Italy's new populist government continues to mull a parallel currency.
In the fixed income space, the 2-year US Treasury currently offers 2.575%, just two basis points off its near 10-year high, while in Italy the 2-year yields 0.245%, sharply higher than the -0.21% seen on May 4. Italian bond yields have risen sharply over the last couple of weeks as talk about a parallel currency in Italy continues. The new populist party has mooted issuing up to EUR100 billion of ‘mini-BOTs' to help pay state arrears. If issued this government IOU would effectively form a parallel currency - a situation that the ECB and the EU would find untenable - and the resulting risk would weigh further on the EUR.
The latest shows retail traders remain long of EUR/USD a contrarian bearish sign but traders trimmed long positions yesterday giving us a mixed signal for the pair.
A look at the daily EURUSD chart shows the December 12 swing low at 1.17175 is being respected in the latest sell-off and it may hold in the short-term. The RSI indicator also shows the pair in oversold territory although they the index has turned higher, again indicating a possible bout of short-term strength. Upside targets 1.19155 while to the downside the November 7 low at 1.15540 is a longer-term target.
EURUSD Price Chart Daily Timeframe (May 31, 2017 May 22, 2018) If you are new to foreign exchange, or if you would like to update your knowledge base, download our and our to help you on your journey.
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--- Written by Nick Cawley, Analyst
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