EURUSD: the relief is temporary

EURUSD: the relief is temporary


The euro             came under intense pressure amid the political crisis in Italy             which fueled fears of euro             break-up and sent the Italian bond yields strongly higher. EURUSD             found support just above 1.15 on Tuesday and is attempting to stage a local recovery during the early European hours. The pair reached 1.1580 so far and may rise further in the short term as Italian yields are back down from highs and the greenback retreats as well.

The overall bearish trend in the EURUSD             pair is intact and will likely continue amid the political woes in the third-largest euro             zone economy. But some local factors may bring a relief to the single currency in the coming days. The eurozone inflation numbers are due tomorrow, and the core CPI             may come in at +1.0% y/y, up from the +0.7% y/y in April. Should the report bring bullish signals, the single currency could show a more pronounced recovery.

But the downtrend won’t be derailed as long as the political situation in the euro             region remains uncertain, and the dollar demand in place. In this context, Friday’s US NFP employment figures will be important as strong wages data may put the euro             under pressure again.In this scenario, EURUSD             may challenge the key 1.15 mark.