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Euro bulls await EC decision on Italy's draft budget

Summary:

On Tuesday the 20th of November, trading on EURUSD closed down. Three bearish movements of 50 pips each were observed during the day. The overall fall amounted to about 1% (from 1.1472 to 1.1359). The fall was facilitated by the overall strengthening of the US currency in response to investors opting to flee from risk and uncertainly around the situation surrounding Italy, which doesn't want to make changes to its budget. Also, pressure on the dollar's competitors increased due to the collapse in oil prices (-7.7%) through commodity currencies.

Here are some reasons to sell the euro: falling prices on the European stock exchange, sales of Italian bonds, widening the spread between the yields of Italian and German 10-year securities, and concerns among investors about the Italian banking sector.  

Day's news (GMT 3):

  • 13:30 UK: public sector net borrowing (Oct).
  • 16:30 Canada: wholesale sales (Sep).
  • 16:30 US: durable goods orders (Oct), initial jobless claims.
  • 18:00 US: existing home sales (Oct), Michigan Consumer Sentiment Index (Nov).
  • 18:30 US: EIA natural gas storage change (Nov 16).

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Fig 1. EURUSD hourly chart.

Current situation:

The price did not reach the estimated level, however we did hit a Tuesday high. The double bearish divergence worked out excellently. Sellers successfully passed the level of 1.1400, driving buyers to 1.1359.

The current price is 1.1386. The euro is recovering along with oil prices, and according to the forecast, there'll be a drop to 1.1312. The European Commission today will announce its decision on the Italy's new draft budget. The EC is expected to reject the it, which will increase the likelihood of new sanctions being imposed. This perhaps the key event of the day. The level of 1.1339 will act as an interim support.


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