Euro continues to stay above technical support with Italian political concerns are easing. Ahead of the G3 central bank meetings USD, EUR and JPY crosses need more attention. Forex traders are quiet on Monday session ahead of Trump-Kim meeting on Tuesday and followed by big policy decisions.

EURUSD climbed to 1.1820 on Monday but failed to breach last week’s high 1.1840. Equity index FTSE MIB (KTM: ITA40) closed up by 1.80%. The index tested and held the key support zone and resume short-term rally.

News: Italy’s new government has no intention of leaving the euro and plans to focus on cutting debt levels, Economy Minister Giovanni Tria said on Sunday, looking to reassure nervous markets, reported by euronews.

Data review: Spain and Italian Services sectors are continued to expand during May whereas France and Germany shifted down a gear during the same period. We could expect France and Germany growth could be rebound in June

  • Spain Services PMI rose to a three-month high of 56.4 in May, from 55.6 in April
  • Italian Services PMI posted 53.1 in May, up from 52.6 in April
  • France Services PMI down to 54.3 in May, from 57.4 in April
  • German Services PMI fall from 53.0 in April to 52.1, its lowest reading since September 2016
  • At a 16-month low of 53.8, the final Eurozone PMI Services Business Activity Index was below April’s 54.7 and the earlier flash estimate of 53.9
    GDP rose by 0.4% in both the EA and the EU during the first quarter of 2018

Data preview:
Data wise this week’s primary focus is on the release of CPI for the US and EZ. Addition to the data risk, the week wraps with the G3 central banks FOMC (Wed), ECB and BOJ (Thu) monetary policy meetings.

Read: ECB vs Fed

TECHNICAL OVERVIEW

The major EURUSD has snapped the seven-weeks falling streak and holding technical level 20MA. The major is subject to consolidate in a tight range this week after a decent rebound from last week’s low. The latest political developments in Italy and FX positioning are indicating the euro is offering limited upside risk in the tight range.

“EUR short positioning reduction has further room to run, particularly if the Eurozone government bond yield curve steepens on the back of Thursday’s ECB meeting,” according to Morgan Stanley Strategist Gek Teng Khoo.

We continue to favor being buying the dip in the medium and long-term. Whereas in the near term we remain cautiously NEUTRAL as we continue to study the action. The further return of USD weakness, which should allow EUR to perform better continuation from the last week with resistance seems at 1.20. Flipside supports are at 1.1590 and 1.1500.
The Q2 range will remain between 1.1450-1.200

Especially in the EUR crosses, we forecast EURJPY offers limited upside, whereas EURGBP remained in a tight range and EURCHF favors dip buying at 1.13.
EURJPY: Buying over 130.30 could open to 130.80 (intraday).

EURCHF: The Corrective trend is facing resistance at 200MA.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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