Dead Cat Bounce For EUR/USD On The Italian News

The EUR/USD is trading in the mid 1.1500s once again. The pair advanced earlier in the day on reports that Italy will set more ambitious deficit targets for 2020 and 2021 while sticking to the 2.4% target which rattled markets. The euro zone’s third-largest economy plans to establish a target of 2.2% for 2020 and 2% for 2021. The intentions to lower the deficit sent Italian bond yields lower, stocks higher and the common currency to higher ground but it never went too far.

The response from the European Commission is still awaited. Rhetoric remains defiant both in Rome and in Brussels. Coalition leaders Matteo Salvini and Luigi di Maio continue bashing the EC for its tough stance while officials insist that Italy must abide by the rules.

The services purchasing managers’ indices from the euro-zone were broadly in line with expectations. The euro-zone services PMI remained unchanged at 54.7 for September in the final read. Germany is on holiday today, and this implies a lower trading volume.

In the US, Dallas Fed President Robert Kaplan said that the Fed might raise rates only twice in 2019, a relatively dovish sentiment. As he was never a hawkish member and talked about next year, his comments were shrugged off by the markets.

Top-tier US data awaits traders later in the day. The ADP Non-Farm Payrolls is projected to show a more significant gain in private sector jobs in September. In August, the ADP report showed an increase of 163K positions. Later on, the ISM Non-Manufacturing PMI carries expectations for a slight slowdown in the pace of expansion in the American services sector. Both serve as hints toward the Non-Farm Payrolls report on Friday.

EUR/USD Technical Analysis

The move higher in the EUR/USD can best be described as a “dead cat bounce.” The move was limited and seemed only to shake out the oversold conditions the pair had been in. The overall trend remains bearish.