EUR/USD bounced after softness in U.S. payrolls data deprived U.S. Treasury yields of fresh fuel to rally further, but this is unlikely to spell an end to the euro's troubles. Italy budget worries remain a downside risk for EUR/USD, especially after the government lowered its 2018 growth forecast nI6N1VP028.
The lowered forecast is likely to heighten tensions between Rome and Brussels nL8N1WK2R6 since Italy's growth forecasts will be a major factor in determining deficit outcomes. BTP yields have rallied sharply again, widening the gap between Italian and German government bond spreads.
Spreads between Germany and the U.S. should hold near recent wides or possibly widen further.
The 10-year U.S. yield failed to break higher today but it should remain buoyed as the Fed's rate hike plans will be unaltered, maintaining the dollar's yield advantage over the euro and the high cost of shorting the greenback.
Techs favor the downside as well as EUR/USD is holding below the daily cloud and a slew of daily moving averages, while monthly RSI is biased down.
EUR/USD bears could be lurking at key resistance areas in the 1.1595/1.1600 and 1.1650/60 areas.
chart: Click here