Where will the euro go in the near future?
Experts of the Canadian bank Scotiabank are currently neutral on the euro / dollar. It is expected that in the short term, the main pair of the Forex market will trade in the range between 1.1500 and 1.1625. Italian problems can break some stability of this tandem.
Italian stocks and bonds are actively growing in response to the fact that the government has prepared a budget plan for 2019, which will go straight to Brussels for a control evaluation. Discussion with European officials is scheduled for October 18th.
On the eve of the European Commission, Jean-Claude Juncker said that the members of his department do not intend to be “too flexible with Italy.” At the same time, his rhetoric was more conciliatory this time compared to earlier statements. Juncker reported that the commission “has no prejudices” regarding the Italian budget.
European Council President Donald Tusk also noted that a “respectful dialogue” should take place between the EC and the Italian government.
Scotiabank believes that fussing around this document could harm the euro. It is not excluded that at the moment, the currency of the region will receive little support from narrowing the spread of Italian bonds with German securities. On Tuesday, the yield spread narrowed by 9 basis points to 295 basis points.
“Short-term trends in the euro / dollar pair look quite flat. Over the last couple of days, the euro has tested the area of 1.16 twice. But so far, there are few signs that the currency has enough momentum to really challenge the key resistance just above 1.16 (resistance to Fibonacci retracement level at 1.1623 and 40-day moving average at 1.1619),” bank analysts write.
If it is not possible to break through the specified area, then a rollback to 1.1560 and below is possible. Rechecking a zone in the short term may be 1.1520 / 40 zones. According to the calculations of the bank, the market needs a more directional impulse to go beyond 1.1500-1.1625.