The Euro continues to drop as Italy's budget drama scares investors away from the Common currency. Within the Italian government, there are mixed opinions on whether the 2019 budget plan should comply with the EU regulations. Leaders of the anti-establishment 5 Star Movement and the far-right League are keen to fulfill the promises they made during their political campaigns, but that will come at the expense of pushing the Italian budget deficit beyond the limits allowed by the EU. Additionally, the Common currency is facing downward pressure from the soaring U.S Dollar, which is enjoying a strong rally after the Final Second Quarter U.S GDP reading printed as expected. The annual quarter on quarter increase of 4.2% represented and confirmed the fastest GDP rise in four years. For today, investors need to watch for the EU CPI reading which will be help in validating or invalidating Draghi's continuous optimism regarding the path of inflation in Europe.
The Euro continues to push lower on the short term due to the dire fundamentals. Most recently, the pair has broken below the 200-period moving average, signaling a possible shift in the medium trend of the pair. Adding to the bearish momentum, the 13-period moving average has also crossed below the 50-period moving average. A break below the 1.16137 support level will pave the way for a drop towards the next key support level at 1.15428.
Support: 1.16137 1.15428
Resistance: 1.16414 1.17233