EUR/USD's rally will probably pause for a period of consolidation after stalling just short of 1.1750/00 resistance, as Italy worries returned to the spotlight. German-Italian yield spreads widened today after Italy's stock market regulator Mario Nava resigned under pressure from 5-Star and League members of Italy's government Click here.
The resignation increases market uncertainty as Italy's anti-establishment government flexes its muscles.
Widening German-Italian spreads caused a similar move in German-U.S.
yields on the shorter end to the dollar's favor.
Daily techs now lean bearish as RSI diverged on the new high and an inverted hammer has formed.
EUR/USD now threatens 1.1650/70 support.
A break there will put a slew of daily moving averages and the daily cloud top in play.
Those sit near 1.1615.
A break of those technical supports could set up a test of the 1.1510/30 structural support zone.
Monthly techs remain constructive, though, suggesting the pair could resume its rally.
As long as it holds above the structural support, the risk remains to the topside.
A break of 1.1750/00 resistance will likely lead to large short covering.
The door to 1.2000/1.2100 would then open.
chart: Click here