EUR/USD: Euro Is Recovering
1000 Extra | Dec 07, 2016 02:01AM ET
During the trading session on December, 5, euro has recovered against the USD after the sharp fall in the morning session due to Prime Minister of Italy Matteo Renzi’s decision to resign after his defeat in a referendum on his flagship constitutional reforms.
In addition to the political uncertainty growth in Italy, Renzi’s resign can make the bank crisis worse due to closing of the bank saving program. In particular, the third largest bank of Italy Banca Monte dei Paschi di Siena SpA (MI:BMPS) has significant difficulties with overdue loans and now is searching for additional funding of 5 billion EUR to remain stable. However the markets are recovering on Monday, as the result of the referendum was quite expected. Also, the ECB has declared that it is ready to buy the Italy bonds, if the results of the referendum will negatively affect the bank sector’s stability.
Resistance levels: 1.0816 (maximum on November, 15), 1.0850, 1.0900 (the level of November, 11), 1.0935, 1.0963, 1.1000 (quite strong psychological level of November, 9), 1.1025, 1.1058.
Support levels: 1.0759 (being tested in the morning session on December, 6), 1.0707, 1.0673, 1.0638 1.0600, 1.0550 и 1.0505 (minimum on December, 5).
On the daily chart the Bollinger Bands® indicator is slightly reversing. The price range is widening, but not as fast as the “bullish” spike has appeared. The slowing of the growth is expected. The other option is a fast downward correction of euro. It is recommended to wait till the situation is clear and keep current “bullish” positions.
The MACD is growing, giving a strong buy signal (the histogram is above the signal line). It is recommended to keep current long positions and open new ones in the short term.
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