- EUR/USD tests lows near 1.1180 and rebounds later.
- Rumours on Italian snap elections stay on the rise.
- Weekly upside in spot still intact at 1.1250.
EUR/USD remains on the defensive today, showing further inability to sustain any occasional bull run above 1.1200 the figure.
EUR/USD looks to Italian politics, trade
Spot attempted a bounce off daily lows in the 1.1180 region following fresh headlines citing the German government is planning to increase its spending to fight the climate change. The impact of this news, however, was as ephemeral as irrelevant.
On a more important issue, EUR appears to have shifted its focus back to the Italian political arena following renewed frictions within the coalition (?) government. In this regard, Lega Nord’s officials stressed that the only alternative to the current government is new elections, talking down at the same time an eventual cabinet reshuffle and/or a technical government.
In the meantime, all eyes remain upon the developments from the US-China trade conflict and the potential meeting between both parties next month in the US, all amidst the so far persistent investors’ preference for safer assets.
What to look for around EUR
The sideline mood in the single currency is extending so far this week, always following USD-dynamics and rising concerns on the trade front and its impact on global growth. However, rallies in the pair are expected to remain limited in the near/medium term in tandem with ECB’s preparations for a fresh wave of monetary stimulus (probably in September), including a potential reduction of interest rates, the re-start of the QE programme and a probable tiered deposit rate system. The ECB has already changed its forward guidance and it now expects rates to remain at ‘present or lower levels’ until at least mid-2020. The unremitting deterioration of the economic outlook in the region and the lack of traction in inflation are seen limiting any occasional bullish attempts in EUR for the time being and also give extra sustain to the dovish stance in the ECB.
EUR/USD levels to watch
At the moment, the pair is losing 0.02% at 1.1198 and faces the next support at 1.1149 (10-day SMA) seconded by 1.1101 (low Jul.25) and finally 1.1026 (2019 low Aug.1). On the other hand, a breakout of 1.1249 (monthly high Aug.6) would target 1.1282 (high Jul.19) en route to 1.1295 (200-day SMA).
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