- EUR/USD created a bullish hammer on Monday, awaits confirmation (positive follow-through).
- Italian political risks could cap upside in the EUR/USD pair.
The EUR/USD created a bullish hammer on Monday as it recovered from the low of 1.1717 and closed at the daily highs above 1.1790.
The bullish candlestick pattern and the oversold conditions as indicated by the 14-day relative strength index (RSI) indicate scope for a rally above the immediate resistance located at 1.1822 (May 9 high).
However, the upside will likely be capped by Italian political uncertainty. As per latest reports, Italy is close to forming a populist government, hence the 10-year Italian-German bond yield spread may continue to rise in the EUR negative manner.
The data calendar is light today, hence the pair remains at the mercy of the Italy-German yield spread and US-German yield spread.
EUR/USD Technical Levels
A positive close today, i.e. a positive follow-through to yesterday’s bullish hammer candle would confirm a short-timer bullish reversal and open doors for a sustained move above 1.1841 (10-day MA), above which a major resistance is seen at 1.1915 (Jan. 9 low).
On the other hand, a break below 1.1750 (Friday’s low) would expose support lined up at 1.1717 (yesterday’s bullish hammer candle low) and 1.17 (psychological support).
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