EUR/USD looks to extend the bounce above 1.1700, Italian politics in focus

• Euro bounces as Eurosceptic Italy’s coalition government formation fails.
• Corrective rally due on the cards ahead of the US NFP?

The EUR bulls take a breather, leaving the EUR/USD pair in a phase of upside consolidation near the 1.17 handle, as markets await fresh developments surrounding the Italian political environment for the next push higher.

Focus on Italian politics at the start of the NFP week

The EUR/USD pair opened the NFP week with a bullish gap of 35-pips and extended the rebound from six-month lows of 1.1646 well above the 1.1700 levels, on the back of weekend’s news that the attempts at forming a coalition between the Five Star Movement and League have failed after Sergio Mattarella, the Italian President, vetoed the choice of economy minister, who was seen as anti-Euro.

The rebound in the Euro triggered fresh US dollar selling across the board, despite the news that North Korea’s leader Kim pushed to kick-start the talks with the US. The US President Trump twitted earlier today that the US team had arrived in North Korea to make arrangements for the Summit, according to Reuters.

The finding currency, Euro, also remains supported amid moderate risk-aversion persisting across Asia, as oil prices extending their selling spiral amid output boost talks. Meanwhile, slow volumes and illiquid trades could also help exaggerate the corrective pullback in the major from half-yearly lows. The UK and US markets are closed in observance of Spring Bank holiday and Memorial Day respectively.

Looking ahead, the focus remains on the Eurozone and US inflation gauges ahead of Friday’s crucial US non-farm payrolls release.

EUR/USD Technical Levels

Yue Wang, Co-Founder of  Forexsignal.guru, notes: “According to Volume Profile study in Tradingview, long-term control point is around 1.1770. Below here, directly bearish toward 1.1594, 1.1550 or even 1.1474/40 could not be ruled out. Although downside may be limited from current levels (if seen, perhaps about 1-2 big figures…?）, I still suggest to well control the risk: partial close the long trade from 1.1655 and lower stop to 1.1530; or simply close the trade for some small profit and wait for better opportunities.   Daily support       Levels: 1.1625 1.1597 1.1582 1.1553. Daily resistance Levels: 1.1694 1.1705 1.1723 1.1732 1.1747.”