Vladimir Miklashevsky, Senior Strategist at Danske Bank, stressed the pair remains vulnerable while decent support should appear at 1.1718.
“EUR crosses were in deep dives yesterday after speculation that Italy’s possible new coalition government would be looking to write off a sizeable chunk of Italian public debt sparked market worries; this was later denied by the parties though and helped to ease selling pressure somewhat. New cycle highs in the US 10Y yield, however, kept EUR/USD under pressure and while rate momentum is currently strong, we do not think US rates are in for another level shift just yet. This should limit the potential for USD strength from a factor that has been the dominating force in FX markets in recent weeks”.
“Our Short-Term Financial Model for EUR/USD suggests the cross is very oversold, and we stress that from a technical point of view, good support should still be seen at 1.1718 (Dec-17 low). The cross is likely to settle in a new range around current levels near term but remains a buy on dips in a 6-12M perspective”.