“¢ Investors looked past the latest optimism over Moody’s stable outlook.
“¢ Renewed worries over Italian fiscal plans prompt some fresh selling.
The EUR/USD pair quickly reversed an early uptick to a multi-day high level of 1.1550 and dropped to fresh session lows in the last hour.
The pair struggled to build on Friday’s goodish rebound from monthly lows and came under some renewed selling pressure during the early European session.
Concerns over Italy’s budgetary plans, evident from some renewed pickup in the Italian bond yields, turned out to be one of the key factors exerting fresh downward pressure on the shared currency.
Investors seemed to have fully digested the latest optimism led by credit rating agency Moody’s stable outlook, which partly offset a downgrade of Italy’s sovereign debt rating to one notch above junk status.
Meanwhile, comments by Italy’s Prime Minister Giuseppe Conte, saying that saying that it is a prejudice if EU pre-announces budget rejection before receiving it, resurfaced fears of a clash and further dented sentiment surrounding the common currency.
Currently hovering around the key 1.1500 psychological mark, market participants now look forward to the publication of Italy’s response to the EU’s high profile warning letter on Italy’s fiscal plans.
Technical levels to watch
A follow-through selling has the potential to continue dragging the pair further towards mid-1.1400s en-route monthly lows support near the 1.1435-30 region. On the flip side, the 1.1550 region might continue to act as an immediate strong resistance, above which a bout of short-covering could assist the pair to aim towards reclaiming the 1.1600 handle.