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Following the recent conclusion of the EU parliamentary elections, focus shifts back to the Italian budget. Matteo Salvini, Italy’s deputy prime minister said that the economy could be hit with a fine of up to 3 billion euro for breaching the EU’s debt and deficit rules. Meanwhile, a number of top spots in the EU are expected to be filled shortly.

Euro Subdued Near a Two-Year Low

The ongoing tensions between the EU and Italy were seen weighing on the single currency. The euro gained 0.1% on the day but price remained close to a two-year low. The decline back below the 1.1182 handle puts the EURUSD into the sideways range. There is scope that further weakness could push the euro own to test 1.1140 level of support.

The pound sterling extended declines for the second consecutive session. The declines came as PM May prepared to leave 10 Downing opening the way for various contenders for the PM’s post. Some of the frontrunners are talking up the narrative of leaving the EU without a Brexit deal in hand.

Will GBPUSD Extend Further Declines?

The cable managed to briefly lift off above the resistance level of 1.2716 last Friday. But the sterling slipped back below this level. The GBPUSD moved back into its range of 1.2716 and 1.2606 by Tuesday’s close. This sideways range could be maintained in the short term, but there is scope for price to breakout. The breakout direction will likely determine the next leg in the trend.

Daily Pivots: (S1) 1.1146; (P) 1.1173; (R1) 1.1186; More.....

No change in EUR/USD's outlook as consolidation from 1.1111 might be extending. Another rise cannot be ruled out but upside should be limited by 1.1263 resistance to bring down trend resumption. On the downside, firm break of 1.1107 will target 100% projection of 1.1448 to 1.1183 from 1.1324 at 1.1059. However, sustained break of 1.1263 resistance will now be an early sign of trend reversal and turn bias to the upside for 1.1448 key resistance.

In the bigger picture, down trend from 1.2555 (2018 high) is still in progress. Such decline would target 78.6% retracement of 1.0339 (2016 low) to 1.2555 (2018 high) at 1.0813 next. Sustained break there will pave the way to retest 1.0339. On the upside, break of 1.1448 resistance is needed to be the first sign of medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

Daily Pivots: (S1) 1.2634; (P) 1.2668; (R1) 1.2687; More....

GBP/USD is staying in consolidation from 1.2605 and intraday bias remains neutral. In case of another recovery, upside should be limited by 1.2865 support turned resistance to bring fall resumption. On the downside, break of 1.2605 will target a test on 1.2391 low first. Firm break there will resume larger down trend to 61.8% projection of 1.4376 to 1.2391 from 1.3381 at 1.2154 next.

In the bigger picture, current development suggests that medium term decline from 1.4376 (2018 high) is not completed, and is possibly ready to resume. Decisive break of 1.2391 would target a test on 1.1946 long term bottom (2016 low). For now, we don't expect a firm break there yet. Hence focus will be on bottoming signal as it approaches 1.1946. In any case, medium term outlook will stay bearish as long as 1.3381 resistance holds, in case of strong rebound.

Pivot (invalidation): 59.10

Our preference Short positions below 59.10 with targets at 58.20 & 57.85 in extension.

Alternative scenario Above 59.10 look for further upside with 59.55 & 59.90 as targets.

Comment The RSI is bearish and calls for further downside.

Pivot (invalidation): 14.4000

Our preference Short positions below 14.4000 with targets at 14.3100 & 14.2800 in extension.

Alternative scenario Above 14.4000 look for further upside with 14.4600 & 14.5200 as targets.

Comment The RSI is mixed and calls for caution.

Pivot (invalidation): 1276.00

Our preference Long positions above 1276.00 with targets at 1285.00 & 1287.00 in extension.

Alternative scenario Below 1276.00 look for further downside with 1272.50 & 1269.00 as targets.

Comment The RSI calls for a rebound.

Pivot (invalidation): 2825.25

Our preference Short positions below 2825.25 with targets at 2791.00 & 2770.75 in extension.

Alternative scenario Above 2825.25 look for further upside with 2840.00 & 2851.50 as targets.

Comment The RSI shows downside momentum.

Daily Pivots: (S1) 1.0040; (P) 1.0070; (R1) 1.0106; More...

No change in USD/CHF's outlook and intraday bias remains neutral first. On the upside, decisive break of 1.0119 resistance will suggest that decline from 1.0237 is merely a correction and has completed. Intraday bias will be turned back to the upside for retesting 1.0237. That will also retain medium term bullishness in the pair. On the downside, however, firm break of 1.0008 should pave the way to retest 0.9879 key support next.

In the bigger picture, USD/CHF is losing upside momentum ahead of 1.0342 key resistance (2016 high). There is no clear sign of reversal yet. But even in case of another rise, we'd be cautious on strong resistance from 1.0342 to limit upside. On the downside, break of 0.9879 support will suggest that larger rise from 0.9186 (2018 low) has completed. Deeper fall will be seen to 0.9716 support for confirmation.

Pivot (invalidation): 11990.00

Our preference Long positions above 11990.00 with targets at 12090.00 & 12130.00 in extension.

Alternative scenario Below 11990.00 look for further downside with 11953.00 & 11930.00 as targets.

Comment The RSI lacks momentum.