EUR/USD looks to end day modestly higher below 1.17 as Italian political drama ends

• The U.S. announces import tariffs on steel and aluminum products.
• Italy’s new coalition government will be officially announced on Friday.
• EUR/USD remains on track to end the choppy day in the green.

The EUR/USD pair fluctuated sharply on Thursday as investors tried to assess the potential impact of the latest developments, including Italian political leaders’ successful attempt to avoid another election in the autumn and the United States’ highly controversial decision to start imposing tariffs on steel and aluminum imports.

After advancing above the 1.17 handle, the EUR/USD pair lost its traction in the early NA session before making a late recovery. As of writing, the pair was trading at 1.1692, adding 30 pips, or 0.25%, on the day.

On Thursday, Italy’s League and 5-Star  have finally reached an agreement to form a coalition government after naming economics professor Giovanni Tria as the candidate to be presented for the ministry of finance. However, news from the United States took the wind out of euro’s sails.

The U.S. Commerce Secretary Wilbur Ross stated that they were going to start  imposing 25% steel and 10% aluminum tariffs on the European Union, Canada, and Mexico starting  midnight tonight. The announcement didn’t allow investors to cheer the news from Italy as flight-to-safety, once again, dominated the trading action. The Dow Jones Industrial Average closed the day 1% lower and the S&P 500 erased 0.7%.

Meanwhile, today’s data from the euro area showed that the core-CPI increased 1.1% in May on a yearly basis to beat the market expectation of 1%. On the other hand, personal spending in the U.S. rose by 0.6% in April to surpass the market estimate of 0.4%. A separate report revealed that the core-PCE price index, the Fed’s preferred  gauge of inflation, increased 0.2% and 1.8% on a monthly and annual basis respectively, reassuring another rate hike in June. Nonetheless, the US Dollar Index failed to make a decisive recovery ahead of tomorrow’s important NFP report and was last seen moving sideways a little below 94.

“According to analysts forecasts, the US is expected to have added 188K in the month, while the unemployment rate is seen steady at 3.9%. The lately more relevant wages’ growth figures are expected to post modest upticks expected to have risen by 0.2% monthly basis, up from 0.1% previously, while the year-on-year number is forecasted at 2.7% from 2.6% in April,”   writes Valeria Bednarik, American Chief Analyst at FXStreet, and adds:

“These numbers will fall short of being a shocker for the Federal Reserve, not good enough to increase chances of more rate hikes, neither too soft to make them step back.”

Technical levels to consider

1.1700 (psychological level) now could be seen as an interim resistance ahead of 1.1770 (20-DMA) and 1.1830 (May 22 high). On the downside, supports align at 1.1640 (daily low), 1.1600 (May 28 low) and 1.1510/00 (May 29 low/psychological level).