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Arne Rasmussen, Chief Analyst at Danske Bank, gives his views on the pair in light of the recent price action and the developments from Italy.

Key Quotes

“In terms of the majors, the euro took another beating on Friday as Italian worries joined force with Spanish tensions, and as USD strength continue to be on the agenda, leading EUR/USD to test new 2018 lows in the 1.1650 area”.

“Some relief seen as euro-sceptic Savona was rejected as finance minister, but until there is more clarity regarding what policy a new Italian government will in fact be pursuing, a political risk premium will likely continue to weigh on the single currency”.

“And with still-strong USD momentum, EUR/USD could be in for another slide this week. Speculative EUR/USD longs continued to be liquidated in the week to last Tuesday but notably while real-money accounts remain net long, leveraged funds have now in fact turned net short; to the extent that the latter may be regarded first movers, it hints that sentiment towards USD may have changed more fundamentally during the recent period of USD strength. The next key levels to watch in the cross are 1.1638 (10-Nov-17 low) and 1.1579 (5-Nov-17 low)”.