EUR/USD fails to break triple bottom despite Italian downgrade

EUR/USD Triple bottom – click image to enlarge

Rating agency Fitch decided to downgrade Italy’s credit rating from A- to BB+ leaving the country’s negative outlook unchanged.  They do not see a stable government in Italy in the near future.

EUR/USD is reacting with another attempt to push through the 1.2960 that has been breached earlier, without any follow-through.

The pair fell earlier on the excellent Non-Farm Payrolls report from the US.

So far, Fitch had the highest rating for Italy. After the downgrade, Fitch matches S&P but Moody’s (which recently downgraded the UK), has Italy in a lower grade.

It’s important to note that while Italy has a political mess, most of the reforms are now on auto-pilot. So, the lack of a stable government doesn’t mean a lack of reform. In addition, Italy had over 60 governments since WWII, and the country is still quite rich.

EUR/USD

EUR/USD is now trading at 1.2973, after another move below 1.2960. The low for the day was 1.2957. Assuming the pair closes above this line, we have a triple bottom.

In the past two Fridays, EUR/USD twice fell below important levels: 1.3170 and 1.30, but eventually closed above these lines. The continuation was seen only afterwards.

For more levels and analysis, see the EUR/USD forecast.