The Euro has been having a bad couple of weeks recently as political uncertainty continues to weigh heavily on the Euro, and a resurgent USD has caused some weakness as well. The main focus over the last few weeks has been the recent Italian elections with the five star party coming to power, and the likelihood that a very progressive yet economically challenging government is likely to be calling the shots. This could mean that Italy, one of the major players in the euro-zone, is likely to but-heads with other Euro leaders in the same way Greece did not too long ago. Greece eventually lost that fight and enacted heavy reforms in order to please the euro-zone, but Italy’s new movement is looking to try and shake up the so called establishment as they feel voters have given them a mandate. The reality is that it will take some time for anything to really come into fruition and for any demands to be made to the euro-zone leaders, but one thing is certain, there will be some demands, and the markets will be paying close attention to see how things work. Historically speaking Italy has been politically volatile over the past 70 years, so potentially the market could be overreacting to things a little here.

Looking at the EURUSD which is the main focus for most traders shorting on Italian news, it’s clear to see that the EURUSD has been struggling for almost a month now. We saw some resurgence today with a push up to resistance at 1.1824 before an announcement on the Italian economic minister and the market was quick to sell. With the bulls soundly defeated today, we could see further pushes to support at 1.1719, which is a key support level, any movement below this and closing would signal a potential push to 1.1582 in the short to medium term. Evidently if the new government is quick to point the finger at the euro-zone and make demands then we could see further falls below this support level and bearish pressure on the Euro much like the Greek saga of old.

The other struggling pair today has been the NZDUSD which has failed to gain any further ground as it attempted to break through resistance at 0.6966 before falling just short of the 20 day moving average as the bears were quick to come back into the market. Tomorrow will be a big day for the NZ economy as trade balance is due out, however in the interim the market is still bearish on the pair  and this failure could see the bears finally look to push down to support 0.6819 on the charts. In the off chance that the bears are unable to take back full control I would look to resistance levels at 0.7054 and 0.7171 in the long run, as the bulls look to drive back up the charts.