EUR/USD's rise on signs of Italian budget flexibility probably won't translate into major gains even though the move kept it above key supports.
After an Il Messaggero's report saying that Italy is ready to adjust 2019 budget measures if markets react badly nL8N1X31EY, Italian-German and German-U.S.
yield spreads tightened sharply, boosting EUR/USD and counteracting EUR/JPY's slide on global risk aversion.
Today's EUR/USD rise held EUR/USD above 1.1410/30 support and the 76.4 percent Fib of the 1.1301-1.1815 rally. The optimism should fade as Rome and Brussels remain at odds over Italy's national budget nL8N1X35N0.
This week's ECB meeting could also present downside EUR/USD risks, particularly during President Mario Draghi's news conference since he'll probably have to address the Italian budget issue.
S&P's Italy review, expected on Friday, could present bearish risks as well. A downgrade along with a negative outlook could spike Italian yields higher and push spreads sharply wider, pressuring EUR/USD down to the lower end of its broad 1.1300-1.1850 range.
If S&P affirms their current view, Italian yields would sink and EUR/USD gain.
October's high could then come into play.
chart: Click here