EURUSD: euro struggling to find a balance point due to uncertainty over the Italian budget

Previous:

On Monday, trading on the single currency closed down. As trading got underway in Europe, buyers attempted to gain a foothold above 1.1550 on the back of an increased appetite for risk. Demand for the euro rose against the backdrop of rising Chinese stocks and the EURJPY cross. After hitting a session high, the euro slumped to 1.1456 as fears over Brexit negotiations and the Italian budget gripped the market. Italian 10-year bond yields once again rose above the 3.5% mark.

Day’s news (GMT+3):

• 09:00 Germany: PPI (Sep).
• 13:00 UK: CBI industrial trends survey – orders (Oct).
• 13:30 UK: MPC member Haldane speech.
• 17:00 Eurozone: consumer confidence (Oct).
• 17:00 US: Richmond Fed manufacturing index (Oct).
• 18:20 UK: BoE Governor Carney’s speech.
• 20:30 US: Fed’s Bostic speech.
• 23:30 US: API weekly crude oil stock (19 Oct).

Fig 1. EURUSD hourly chart.

Current situation:

Yesterday turned out exactly as I expected. We got a correction on the euro from 1.1550 to 1.1456. The drop came to an end at around the 67^th degree. The bears tested this level at the opening of the European session. I see markets behaving in a similar way to yesterday, when the euro made a hew high before dropping. The fundamentals haven’t changed, but something tells me that the euro is going to rise from 1.1440 to around 1.1500-1.1508 (high probability of mirroring the growth from 1.1433 to 1.1550). If we see some sharp growth, I won’t rule out a rise to 1.1523.