US DOLLAR TALKING POINTS:
- Q4 has started off in a trending fashion as the moves that showed prominently to end Q3 have largely remained. EUR/USD pushed down to a fresh six-week low and the US Dollar has driven right back to June resistance around the 95.53 level. This theme in both markets appears to be driven by dynamics around Italian politics along with a potential debt stand-off, and Italian bond yields have been rising of recent to incorporate this additional risk. This has driven the Euro lower, very similar to what was seen in the month of May. During that run – sellers took a step back from the ledge as calm developed in June.
- While a bit of risk aversion continues to show in some currencies such as the Euro, US Dollar or British Pound; other markets are showing very different themes. Both US and Japanese equities remain strong while trading near key high watermarks: The Nikkei is trading at fresh 27-year highs after last month’s bullish breakout while the S&P 500caught a bounce from confluent support yesterday to re-approach those all-time-highs set just a couple of weeks ago.
EUR/USD BULLS PUSH BACK TO KEY 1.1530 LEVEL
It’s been an active open to Q4 already and both the Euro and US Dollar have remained on the move, furthering their quarter-end trends. In EUR/USD, prices have already sunk down to a fresh six-week-low before catching a quick bounce off of the 1.1500 psychological level. This support remained unfettered through September as buyers were able to hold the line at 1.1530; but already on the new quarter sellers have been able to push-lower, keeping the door open for a deeper bearish break down to fresh lows.
EUR/USD EIGHT-HOUR PRICE CHART: SELLERS PERSIST, 1.1530 BACK IN PLAY
The pace of selling in the Euro is very similar to what was seen in the month of May and then again in early-August. This is when the single currency was being pushed lower as a series of bigger-picture threats came to light. In May, we were looking at pressures emanating from Italian politics, fearful over a potential debt stand-off between the ECB and the newly-elected Italian government. That seemed to take a backseat as we traded into June, but EUR/USD remained a few hundred pips from where we were in February and March. Early-August saw fresh fears emanate from the situation in Turkey, worried about the potential for debt contagion within Euro-Zone banks. But that, too, took a back-seat in late August as EUR/USD recovered the entirety of those losses and then some.
But more recently, as in over the past week, fears have re-fired as driven by dynamics in Italy. The Italian government proposed a budget last week that will likely be rejected by Brussels, and this has driven a fresh host of fears that we may be at the early stages of an impasse between the powers that be in Europe, and the Euro-Skeptic parties that were voted to power in Italy a few months ago.
Italian bond yields have continued to spike over the past couple of weeks, and this has driven selling in the Euro. Will we see these fears take a step back as we saw in May/June? Or are we in for something different this time as Italy pushes the envelope with a Brussels that appears backed into the corner?
For its part, EUR/USD has shown no signs yet of slowing down. We did get a bump from that failed attempt to take out 1.1500 earlier this morning, and prices in the pair even moved back for a re-test of prior support. But sellers came back in fairly soon, and prices have pushed right back down towards that 1.1530 prior support.
EUR/USD FOUR-HOUR PRICE CHART
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