The market is easily replaced by changes of direction, which emphasizes the low confidence of trade and how fragile are the foundations of an emerging trend. Discussions revolve around old topics - China and trade, Italy, Brexit - in the face of which doubts appear in the markets, whether we have not gone too far. However, the EUR has its own sources of negative pressure - Italy. On Thursday, Brussels officially responded to the project's Italian budget, where the European Commission warns that the draft budget for 2019 contains "obvious significant deviation" from EU rules. It is about an increase in budget expenditure by 2.7 percent, while EU rules allow only 0.1 percent. The structural deficit is to deepen by 0.8%, while earlier plans assumed its contraction by 0.6%. The EC is asking for clarifications regarding the budget and gives you time to answer by noon on Monday, October 22. EC's expectations are not new, but last Friday was the day of taking care of everything, so the Italian 10-year's yields are 336 bp higher than their German counterparts - at the most since 2013 and a sign of increased credit risk. However, it is uncertain whether Italy is preparing a repetition of the Euroland debt crisis, but at this stage, it is not possible to completely rule out this scenario - this is the case when populists can not count.
Let's now take a look at the EUR/JPY technical picture at the H4 time frame. The market has retraced 61% of the previous swing down from the level of 130.50 and the prices are now hovering around the level of 129.67. Moreover, the market has broken out of the golden trend line, so the bulls are trying to regain control over the market. The next target for them is seen at the level of 130.50, just below the key technical resistance zone between the levels of 130.68 - 130.86. The nearest support is seen at the level of 129.1. Please notice, the positive momentum and oversold market conditions support the bullish bias.
