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forex EUR/USD: Focus on Italy-German yield spread ahead of Italy budget deadline

EUR/USD: Focuson Italy-German yieldspreadahead

of Italy budget deadlin.

  • Italy-German yield spread looks set to rise in the EUR-negative manner as Italy is unlikely to revise lower its expansive budget deficit target.

The EUR/USD could drop below 1.13 for the first time since June 2017 as the standoff between Rome and Brussels will likely lead to a widening of the yield spread between Italian government bonds and German bunds.

The currency pair registered marginal gains in Asia, possibly due to reports stating that Italy is considering to tweak the plan by lowering 2019 growth forecast to 1 percent to secure a budget deal with the European Union.

Resultado de imagen para forex news

Thedisputed fiscal deficittarget, however, is set to remainunchangedat 2.4 percent, according to Repubblica.

Simply put, both sides remain far apart on key issues. As a result, the spread between the 10-year Italian government bond yield and its German counterpart, currently at 294 basis points (bps), will likely jump back above 300 bps, leading to a sell-off in the common currency.

Notably, the widening of the yield spread would only bolster the already bearish technical setup: the EUR charted a third lower high at 1.15 last week, having topped out at 1.1815 in September.

 

At press time, the EUR/USD is trading at 1.1323. Rome has until Tuesday to submit a revised budget draft to the EU.

EUR/USD Technical Levels

EUR/USD

Overview:
Last Price: 1.1322
Daily change: -16 pips
Daily change: -0.141%
Daily Open: 1.1338
Trends:
Daily SMA20: 1.1426
Daily SMA50: 1.154
Daily SMA100: 1.1579
Daily SMA200: 1.1842
Levels:
Daily High: 1.1369
Daily Low: 1.1316
Weekly High: 1.15
Weekly Low: 1.1316
Monthly High: 1.1625
Monthly Low: 1.1302
Daily Fibonacci 38.2%: 1.1337
Daily Fibonacci 61.8%: 1.1349
Daily Pivot Point S1: 1.1313
Daily Pivot Point S2: 1.1288
Daily Pivot Point S3: 1.126
Daily Pivot Point R1: 1.1366
Daily Pivot Point R2: 1.1394
Daily Pivot Point R3: 1.1419

 

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