Italy returned to the spotlight in forex today after the EU severely downgraded projections for Italy’s structural deficit nB5N1SU01F, but it’s unlikely to derail EUR/USD’s recovery just yet.
The revised deficit numbers combined with big downside surprises to German September export/import numbers to sink EUR/USD towards 1.1400, though the losses didn’t last.
Traders still appear to be focusing on the lack of a catalyst to strengthen the dollar.
U.S. Treasury 10-year yields remain near recent highs but have been unable to break above October’s 3.26 percent peak.
The failure to break higher could be due to markets having already priced in Fed rate hikes along with the expectation that the Fed will not take a more aggressive rate hike path.
Stagnant yields temper dollar strength.
Extremely large 1.1500 EUR/USD expiries coming due are also helping to buoy the pair.
Bulls will need a clear 1.1500 break to take greater control.
Achieving that would put the daily cloud base and 1.1650/60 resistance in play.
chart: Click here