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EUR/USD closed below 76.4% Fib despite oversold conditions, focus on Italy

EUR/USD closed below 1.1790 - 38.2 percent Fibonacci retracement of Nov-Feb rally

BREAKING NEWS - Mon May 21, 2018

The relative strength index (RSI) continues to show oversold conditions. Focus on Italy-German bond yield spread. The EUR/USD closed below 1.1790 - 38.2 percent Fibonacci retracement on Friday and dipped to a fresh four-month low of 1.1744, despite the oversold conditions as shown by the RSI. Further, the US 10-year treasury yield created a bearish outside-day candle, signaling the rallies in the yields and greenback may be due for a correction. Still, the EUR/USD is showing no signs of life, possibly due to Italian political uncertainty and the resulting rise in the Italian-German yield differential. The 10-year Italy-German bond yield spread rose to four-month highs and the 10-year Italian yield jumped to a three-month high of 2.14 percent last week. Italy's President is expected to confirm a coalition between the League and the Five-Star Movement (M5S) today. So, Italy is all set to have the most eurosceptic government in the region, so further widening of the Italian-German yield spread could widen further. However, if the political uncertainty subsides, then EUR/USD may witness a corrective rally. EUR/USD Technical Levels A break below 1.1718 (Dec. 12 low) would expose support lined up at 1.1669 (Oct. 6 low) and 1.1662 (Aug. 17 low). On the higher side, resistance is seen at 1.1790 (76.4 percent Fibonacci retracement), 1.1822 (May 9 low) and 1.1845 (descending 10-day moving average).   TREND INDEX OB/OS INDEX VOLATILY INDEX 15M Bearish Neutral Low 1H Bullish Neutral Low 4H Bearish Oversold Shrinking 1D Bearish Oversold Shrinking 1W Bearish Oversold Shrinking Updated May 21, 04:15 GMT  

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