Global macro overview for 02/10/2018
The Euro is lower across the board and it attracts risk aversion, because problems with the budget of Italy attract attention, especially with comments that Italy would be better with its own currency. Until investors find a better topic for discussion, we may have to wait for a temporary period of turbulence.
The buzz around the Italian budget is starting to get louder with lower-level officials who are looking for five minutes of fame. Claudio Borghi, the eurosceptic head of the Italian budget committee, said Italy would deal with budget problems if it had its own currency. At that time, the country could decide on a deficit of 3.1% GDP. Let me just remind you that the 2.4% approved in the project for the next year GDP already generates Brussels indignation, especially that it concerns a country with a public debt of 131.8% GDP. A detailed draft budget is to be presented to the European Commission on October 15, which gives plenty of time for speculation and shocking comments. The reaction of rating agencies is an additional risk. Yields of 10-year Italian bonds are up to 3.40% and improve 4-year records.
Let’s now take a look at the EUR/USD technical picture at the H4 time frame. EUR / USD broke the bottom band of consolidation, which was in force for most of the holiday. How important this zone is, was seen in August during the “Turkish crisis”, when a successful breakthrough triggered avalanche drops to 1.13. Now, the slump should not be so strong, but we face the risk of temporary pitting. Currently, the pair trades at the support at the level of 1.1525 in oversold market conditions. Nevertheless, the weak and negative momentum is still indicating a possible slide even lower, towards the next technical support at the level of 1.1500.