The Euro falls following disagreements within the European Union on both the Brexit deal and Italy’s proposed budget plan for 2019. During this week’s EU summit, the European leaders were still not able to find a solution on the border issue between Northern Ireland and the Rep. of Ireland which could mean that the UK might delay leaving the EU or even leave the EU without a deal. This causes even greater uncertainty within both the British and European economies. Yesterday, Italian bonds continued to sell off as the EU’s executive body sent a letter to the Italian government asking them to make changes to their proposed budget plan as soon as the 20th of October. Further pressure is also put on the Euro as the greenback continues its rally following Wednesday’s hawkish FOMC minutes. Alongside any political developments from the EU summit, investors need to monitor the release of the Existing Home Sales figure from the U.S as it will give us an idea about the current state of the U.S housing market which will surely have an effect on the strength of the U.S Dollar.
The Euro drops towards the 1.1438 area following yesterday's break of the 1.1517 support level. As we reached a new support level, we might see some profit taking unless conditions surrounding EU politics worsen. If Brexit politics and Italy's budget plan point towards more uncertainty, investors will most likely sell the Euro even further. This will be confirmed by a break of the lower end of the current support level at 1.1416.
Support: 1.1416 1.1361
Resistance: 1.1517 1.1631