EUR/USD Daily Fundamental Forecast – December 05, 2016

EURUSD has been smashed this morning as the Italians voted a No for constitutional reforms in their country yesterday and the Italian PM has resigned based on the vote. This has thrown the 3rd largest Euro economy into turmoil and confusion as this would mean a reversal of many of the policies followed by the Renzi government and this would cause financial instability in the country making the euro region even more of a risk now for the investors and reducing the confidence in the euro.

As a result of this, the morning has opened today with a large gap in the pair and right now, the pair is testing the strong support at 1.0550. We have been mentioning that 1.0500 is the area of last stand for the bulls and a break of that could easily open up the way towards 1.00. It remains to be seen whether this support region will hold for today. We have the ECB meeting scheduled later in this week when the market will be expecting Draghi to spell out the timeline of the QE program which is expected to end in March 2017. If he doesnt choose the extend the QE program, that is likely to give a boost to the euro but right now, all the focus is on the aftermath of the Italian referendum.

Looking ahead to today, we have to see how the euro markets react to the news of the Italian referendum outcome and that will be key for the further short term direction of the euro as it had looked strong on Friday but the results over the weekend have changed everything. There is no other major news scheduled to be released from the euro region for today and so expect the euro markets to be gripped by some tension and panic when they open for the day later and expect the EURUSD pair to come under some extreme pressure during the course of the day.