ITALY BECOMES THE CENTER OF FINANCIAL MARKETS ATTENTION

ITALIAN CRISIS UNFOLDS

The Italian economy became the center of financial markets attention this week, with short and longer-dated Italian bond-yields surging to multi-year highs as investors feared Italy might exit the European Union. Political and economic uncertainty and failed talks between Italy’s two main anti-establishment parties, caused investors to sell Italian bonds and stocks, and flee into safe-haven asset classes. The Japanese yen and Swiss franc currencies became notable gainers in the foreign exchange market, with traders and investors selling the EURJPY and EURCHF pair’s, as contagion fears spooked financial markets.

• The EURCHF pair remains bearish while trading below the 1.1600 level, sellers may test towards the 1.1480 and 1.1288 support levels.

• If the EURCHF pair moves above the 1.1600 level, buyers may test towards the 1.1648 and 1.1710 levels.

CRYPTOS RECOVER

Cryptocurrencies recovered heavy early week trading-losses, as dip-buyers stepped in from oversold levels and improved trading sentiment returned to the alternative coin space. Bitcoin, Ethereum, Ripple, and Litecoin started the trading week under heavy selling pressure, with Bitcoin falling below the $7,000 level while Ethereum briefly traded below $500. Buyers soon moved in from overstretched levels, with the broader cryptocurrency gradually recovering weekly losses. Confidence had remained depressed in the digital currency, market since the US Justice Department’s called for a probe into the speculated manipulation of Bitcoin prices last week.

• The BTCUSD pair remains bearish while trading below the $7,500 level, further losses towards $7,000 and $6,400 seems possible.

• If the BTCUSD pair moves above the $7,500 level, price may correct back towards the $8,200 and $8,800 resistance levels.

BOC ON HOLD

The Canadian dollar firmed against the US dollar this week as the Bank of Canada hinted at hiking rates in the near-term. The Bank of Canada kept rates on hold at 1.25 percent, which was broadly in line with market expectations. The USDCAD pair spiked lower, as the BOC policy statement noted that developments since April further reinforce the Governing Council's view that higher interest rates will soon be warranted. The policy statement did, however, note economic headwinds may develop from the North Atlantic Free Trade Agreement, and uncertainty in some emerging market economies.  

• The USDCAD pair is bearish while trading below the 1.2900 level, key support is found at the 1.2840 and 1.2750 levels.

• If the USDCAD pair moves above the 1.2900 level, buyers may test towards the 1.3140 and 1.3265 resistance levels.

GOLD ABOVE $1,300

Gold moved back above the $1,300 level this week, as the yellow metal became a safe-haven for investors fleeing European bonds and equities. Fears of the Italian and Spanish political situations and a correction lower in the value of the US dollar index, helped push the price of XAUUSD back above the key $1,300 level. Gold usually becomes a major beneficiary in times of extreme political and economic uncertainty. Investors seek out physical gold because it usually holds its value well in times of crisis, and is considered a safe alternative to store wealth.

• XAUUSD remains bullish while trading above the $1,300 level, key technical resistance is found at the $1,307 and $1,318 level.

• If XAUUSD moves below the $1,300 level, sellers may test back towards the $1,296 and $1,288 support levels.