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EURUSD: Italian debt selloff piling pressure on the euro


On Tuesday the 23rd of October, trading on the euro closed slightly up. Despite the bulls’ efforts to recover their losses, they were held back by the uncertainty surrounding Italy and the UK.

The European Commission has officially requested the Italian government to revise its 2019 budget in accordance with the EU’s fiscal requirements.

Italian Prime Minister Giuseppe Conte has said that the government has no plans to change its budget. Italian 10-year bond yields jumped to 3.60%, rising further to 3.62% in today’s Asian session.

Day’s news (GMT+3):

  • 10:15 France: Markit manufacturing PMI (Oct), Markit services PMI (Oct).
  • 10:30 Germany: Markit manufacturing PMI (Oct), Markit services PMI (Oct).
  • 11:00 Eurozone: Markit manufacturing PMI (Oct), Markit services PMI (Oct), M3 money supply (Sep), private loans (Sep).
  • 11:30 UK: BBA mortgage approvals (Sep).
  • 16:00 US: housing price index (Aug).
  • 16:45 US: Markit manufacturing PMI (Oct), Markit services PMI (Oct).
  • 17:00 Canada: BoC interest rate decision.
  • 17:00 US: new home sales change (Sep).
  • 17:30 EIA crude oil stocks change (19 Oct).
  • 18:15 Canada: BoC press conference.
  • 21:00 US: Fed’s Beige Book.

Fig 1. EURUSD hourly chart.

Current situation:

On Tuesday, the pair made it to the 45th degree, but to the one that was at 1.1508 before the pair reached new lows. The situation in Italy won’t allow the euro to make any significant gains against the greenback.

The technical pictures contradict each other on different timeframes. To me, this means that we can expect the EURUSD pair to fluctuate today. Based on the hourly and 4-hour timeframes, I’m going to risk predicting a return to the 45th degree at 1.1495. I’m not ruling out a test of the 1.1440 mark. This will depend on how the situations in Italy and the UK develop. If we get any negative news, expect 1.1440 to be tested. As long as the Italian budget remains unresolved, it’s very risky to open long positions on the euro with the current price formations.

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