EUR/USD Threatens Yearly Low As Euro Worries Back In The Spotlight

EUR/USD FOUR-HOUR PRICE CHART: SELLERS RETURN AT 1.1500 TO ERADICATE NOVEMBER GAINS

(Click on image to enlarge)

eurusd eur/usd four hour price chart

Chart prepared by James Stanley

Earlier today, Italy’s Economic Minister, Giovanni Tria, said that Brussels’ demands on deficit cuts would be ‘suicide’ for the Italian economy. And yesterday the IMF warned that Italy was vulnerable amid rising rates and that countries with ‘weaker macroeconomic fundamentals and limited policy buffers’ could face hardships as there is ‘appreciable uncertainty, and contagion from future stress could be notable.’ So, it would appear that we’re nowhere near resolution in that scenario, and in response, Italian bonds have continued to sell-off as yields hit their highest level in a week on the back of these developments.

In the European currency, price action had started to build into a bullish backdrop in November trade, partially assisted by a pullback in the US Dollar; but that theme of strength seemingly sold-out with yesterday’s break of support. This could be a difficult market to work with ahead of the weekend as prices remain very near that yearly low. The price of 1.1300 has twice rebuked bearish trends over the past few months: First in mid-August and then again in late-October. A third test may not be able to hold the lows, but a lack of nearby resistance makes the prospect of entry a bit less attractive given risk-reward potential down to 1.1300.

EUR/USD EIGHT-HOUR PRICE CHART: DROP FROM 1.1500 SLOWS DOWN AS 1.1300 SUPPORT NEARS

(Click on image to enlarge)

eurusd eur/usd eight hour price chart

Chart prepared by James Stanley

This could open the door to bearish breakout strategies on prints of new lows after next week’s open. Or, alternatively, a pullback to an area a bit closer to short-term resistance that could allow for adequate risk management for bearish approaches, and I’ve outlined two possible areas inside of the resistance zone on the below chart; around 1.1395 and then 1.1430.

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Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

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