EUR/USD drops through 1.1525 near term support today as selling intensified. Technically, that should confirm completion of corrective rebound from 1.1300, with three waves up to 1.1814, after hitting 38.2% retracement of 1.2555 to 1.1300 at 1.1779. Retest of 1.1300 should be seen next.
The renewed selloff was triggered by comments from the euroceptic politicians and government in Italy. Firstly, president of the lower house budget committee Claudio Borghi, economics spokesman of the League, told Reuters that ” I am personally convinced that Italy would be better off with its own currency”. Though, he also repeated again and again that “leaving the euro is not in the government’s program and it has no plans to do so.” Borghi’s position is well known and it’s actually nothing new.
Secondly, from 5-Star Movement Leader, Deputy PM Luigi Di Maio, insisted that “We are not turning back from that 2.4 percent target, that has to be clear … We will not backtrack by a millimetre”. Another Deputy PM Matteo Salvini, leader of the League also said yesterday that “No-one in Italy is taken in by Juncker’s threats.”
Meanwhile, European Commission Vice President Valdis Dombrovskis reitereated today that “what we see currently now seems to be not compliant with the Stability and Growth Pact but we are open to dialogue with the Italian authorities and hope that the budget will be brought in line with the requirements of the Stability and Growth Pact.”
In short, Italy is in clash with EU on budget and no one is backing down.
