The political future of Europe and the world trade are at the center of the discussions on the financial markets, but the shift to trading conditions is marginal with the predominance of risk appetite.
At the beginning of the new week, investors are less worried about the developments on the political scene in Italy. The new Prime Minister Conte was sworn in and will lead the coalition government of the Five Star Movement and the Northern League, which certainly suppresses fears of expedited elections, but will not silence speculation as to how this Eurosceptics and oppositionists' coalition will last. The yield on 10-year Italian bonds is down to 2.63% (last week it was 3.44% for a moment), but we are still far away from the level of 2.0% from the beginning of May.
The weekend meeting of the G7 finance ministers before the upcoming summit of leaders turned into the US versus the rest of the world, where the remaining six expressed "unanimous concern and disappointment" in the commercial policy of President Trump. The last week's statement about the lack of a prolongation of steel and aluminum import exemptions for the EU, Mexico and Canada warms up the atmosphere and scrambles the wounds that emerged in the first quarter when Trump pushed the US agenda to strengthen international trade. Then, the initial effect on the USD was negative (he stressed Trump's incalculable damage to the currency), even if in the long run it could mean a reduction in imports and an improvement in the trade balance. In addition, the unleashing of trade wars will hit the risk appetite, which indirectly attracts capital to the USD.
Only because the opinion of Trump is often changeable (see the cancellation of appeals of the summit with North Korean leader Kim Jong Unem), the market is not quite up to fears about trade wars without hard resolutions, and the turmoil of recent days could "tame" investors and everyone counts for a moment of calm. From a macro perspective, it is better than it can be, as the solid NFP report reminded us on Friday and the higher-than-expected ISM will give US industry. Thus, the stock market is climbing up, EUR has a rally of relief due to Italy, and good data and risk-on mode abolish for USD. The problem is that markets remain vulnerable to unexpected twists and risk factors, so the vigilance is required.
Let's now take a look at the EUR/USD technical picture at the H4 time frame. The market is trying to break through the important technical resistance zone between the levels of 1.1710 - 1.1726. In this breakout will last, then the next target for bulls is seen at the level of 1.1756 and even 1.1829. The positive and quite strong momentum supports the short-term bullish bias, but in a case of a failure, the nearest support is seen at the level of 1.1661 and 1.1644. Any slide below the level of 1.1606 will likely extend the move downward toward the level of 1.1580. The technical support at the swing low at the level of 1.1509 is still the key level for bulls.