Rancor over Italy's budget proposal is growing and has EUR/USD bulls on edge as its bottoming process is in jeopardy.
Tensions were ratcheted up after Lega's economic head, Claudio Borghi, suggested that Italy would be better off with its own currency and Deputy PM Salvini said Rome was ready to seek damages "from those who want to harm Italy" nR1N1RB01R.
Meanwhile, the EU's executive head, Jean-Claude Juncker, nB5N1O400K warned of the possibility of a Greek-style crisis in Italy, adding to evidence the EU may draw a hard line over the budget.
The contentious rhetoric has driven Italian-German and German-U.S.
yield spreads wider again which in turn has helped drive EUR/USD towards 1.1500.
Option barrier protection ahead of that level stemmed the slide for now but the pair's bounce off the low has been meager and failed to reach old support near 1.1550/60.
Technicals suggest a 1.1500 break is likely as RSIs are biased down and EUR/USD is below the daily cloud.
Should budget tensions escalate further EUR/USD bear sentiment will grow.
1.1500 support is likely to break and the 2018 EBS low at 1.1301 will be targeted.
chart: Click here