Sellers defend the near-term bearish bias; price falls to a session low of 1.1384
The near-term bearish momentum is still very much intact for EUR/USD as sellers state their case defending a move to get above the 100-hour MA (red line). A similar attempt on Friday also saw price try to break above that level but fail as well and we're seeing more of the same in the new week.
The euro got a bit of a relief to start the day as Italian bonds recover some poise after S&P decided to leave Italy's credit rating unchanged, although lowering the outlook to 'negative'. The news was interpreted positively by investors and BTPs moved higher to begin the day.
But much like last Monday's optimism surrounding Moody's credit rating decision - which also helped to lift the euro, it's just not lasting and we're already seeing similar symptoms as the optimism starts to fade.
Although credit rating risks are out of the way, the single currency is still facing similar problems that aren't going to go away any time soon. Italy's debt/budget situation is still in limbo and economic growth is still seen as flagging, alongside an inflation outlook that's starting to threaten to turn softer.
Those factors alone are a real threat to any euro gains at this point as they are also potentially going to weigh on the ECB's normalisation outlook in 2019.
Not to mention, we're starting to see risks arise from German politics as Merkel's CDU party lost further ground in Hesse's state election over the weekend. While German politics hasn't been a major drag for the euro yet, it's something to keep abreast of if we start to see rising populism in the country.
We're nowhere near levels seen in other European nations just yet but if the status quo starts to change, this will be an added dimension of risk that will plague the euro moving forward.
