Italy’s fiscal problems have been known for a while now, and the last time I talked about this issue I gave an overview of why the EU rejected the Italian budget. In a nutshell, the Italian budget deficit is projected to be larger than their GDP growth which means that the debt-to-GDP ratio would increase.
Today, the Italian government is to proceed with a revised budget proposal in hopes of getting Brussels to accept the budget. However, given that the Italian government is mostly populist, it will find it difficult to pursue such important changes in budget. Still, everything is possible.
This situation creates two immediate target levels: the first, is the Resistance level at the 50% Fibonacci level, at 1.1452, in the case where the Italian budget is accepted by the EU, and the second is the psychological Support level at 1.12, just above the 38.2% Fibonacci at 1.1194, which could potentially be broken if the budget is rejected. If the Support level is broken then the next level should be the psychological Support at 1.11, with the next Fibonacci level at 23.6% being at 1.087.
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Dr Nektarios Michail
Market Analyst
HotForex
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