- EUR / USD remains on the defensive near a six-week low.
- Italian Prime Minister Conte faces a vote of confidence in the lower house.
- Cases of coronavirus are increasing in the United States and Europe.
- The meeting of the Eurogroup and the Italian IPC will decorate the economic calendar in the middle of the holiday in the United States.
He EUR / USD remains under pressure around 1.2070, with a fall of 0.05% on the day, at the start of the European session on Monday. The currency pair has previously dropped to new lows since December 9 as the US dollar has started the week maintaining its strength. However, the absence of major catalysts amid the US holiday and cautious sentiment ahead of the key event in Italy puts investors to the test.
Italian politics is getting interesting as the prime minister, Giuseppe Conte, faces a vote of confidence in the lower house on Monday. Although Prime Minister Conte is likely to win, according to Bloomberg, Tuesday’s Senate vote may reject him after the recent shock from former ally Matteo Renzi.
“Conte needs about a dozen more votes in the Senate to restore an absolute majority in the 321-member upper house after the desertion of Renzi’s group“Bloomberg said.
On the other hand, Rising Coronavirus Cases Push Rome Towards Tighter Restrictions Starting Monday, according to the Minister of Health, Roberto Speranza. According to the latest official record, 16,000 new infections and 477 deaths could be found due to the virus.
On the other side of the Atlantic, the US Center for Disease Control and Prevention (CDC) reported that the total number of coronavirus cases was 23,653,919 yesterday compared to 23,440. 774 of the previous report of January 16. It should be noted that vaccine producers claim to have the ability to tame virus strains, but cannot tame market fears.
Aside from virus and policy updates, cautious sentiment ahead of the first day in office of the US president-elect, Joe Biden, and initially negative signals for Canadian oil companies and taxpayers influence risk.
Against this background, US and European stock index futures remain on the defensive, while Asia-Pacific stocks remain pessimistic. Furthermore, the US dollar DXY index is climbing to a new high since December 21 at the time of writing.
During today’s session, Italy’s December CPI consumer price index, which is expected to remain unchanged at -0.1% yoy, will join the political game in Rome and the Eurogroup meeting to entertain EUR / USD investors. While the news from Italy may keep sellers hopeful, talks between ECB President Christine Lagarde and other members of the bloc may help the euro lick its wounds. It is worth mentioning that the holiday in America, due to Martin Luther King Day, will limit the movements of the pair.
EUR / USD technical analysis
While stretching Friday’s downside breakout from the 50-day SMA, the EUR / USD bears attack the 38.2% Fibonacci retracement of the move up from November 2020 to the monthly high near 1.2070-65. However, it should be noted that the December 2 low near 1.2040 and the round 1.2000 level will be tough bones for sellers to break. Meanwhile, an upside test of the 50-day SMA, now at 1.2091, could point to a downtrend line from Jan 7, currently around 1.2105, to confirm the corrective pullback towards the previous support zone from late. December, now turned into resistance, around 1.2130.
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