EUR/USD is testing the 1.1500 handle at the moment
With price unable to move past the 100-hour MA (red line), sellers are making sure that any upside in the pair remains one that is being sold into. Despite the single currency's decent performance on Thursday and Friday, no key levels were broken and so far tests of the 100-hour MA has failed which means that the near-term bias remains more bearish.
As I mentioned before, it's tough to see the euro pull off any sustained rallies this month as long as the risks in Italy aren't cleared yet. It's just something that you can't ignore. And so far, the technical levels in the chart continues to support that notion as well.
With support from the May low @ 1.1510 also looking to give way, the pair looks on course for a retest of the year's lows once again if the fundamental stories for both the euro and dollar doesn't change.
The greenback continues to be offered support from rising yields and the improving economy while the euro remains weighed down by Italy's budget worries currently. Add to the fact that the yields spread between 10-year Treasuries and German bund yields are at their widest on record, the case of interest rate divergence is making a comeback to weigh on the currency pair once again.
For Italy and the euro, things sure look like they will get a bit worse before they become better at this juncture. The risk now is that you can't rule out headlines from changing the rhetoric. All it takes is some form of gesture to compromise from Italy's government and things will easily switch around.
