EUR / USD: Trump's maneuver and the Italian question

Despite the relatively positive results of the G-20 summit, the euro-dollar pair took them quite calmly, with cautious optimism. Contrary to the expectations of many experts, Monday's trading opened almost at the Friday closing levels, that is, without a gap. The subsequent price increase is more likely to be connected not with China, but with Italy, which, according to rumors, has shown readiness to reach a compromise in the budget issue. However, first things first.

Yesterday, the press could see a lot of headlines that the US and China "stopped a trade war." This is not entirely true, or rather, not at all. The only plus of the G20 is that the summit did not lead to an escalation of the trade conflict, while all other decisions regarding US-China relations are in the nature of a big political game.

Donald Trump is an experienced businessman and quite often applies the experience of entrepreneurship in political relations. Just a week before the key negotiations, he prudently "raised the rates", threatening to introduce new duties for 237 billion dollars, from January 1. Thus, he expanded the scope of the upcoming talks, while duties that were not yet introduced became an element of "bargaining" with Xi Jinping.

After all, the essence of the agreements reached is that Washington will not introduce additional tariffs until March 2019. During this time, the parties will conduct negotiations, according to the results of which it will be clear on which scenario further events will develop. Either the United States and China will conclude a broad trade deal, or the trade war will continue. It sounds optimistic and promising, but apart from previous events, nothing much happened. For if Trump did not threaten to impose 237 billion fees, the results of the G20 summit would not sound so impressive. The parties would only announce the continuation of negotiations.

This explains the calm reaction of the currency market to the results of the Argentine meeting. The main events of the summit took place on Saturday, so the traders had plenty of time to evaluate their essence. After all, by and large, this is not the end of the trade war, but only another attempt to reach an agreement, of which there have been quite a few over the past year. By the way, today in the second half of the day, the US Treasury will speak on one of the American TV channels, who will tell about the details of the meeting of the leaders of the countries. Therefore, it is likely that the market has not fully played this topic especially if Mnuchin reports additional information that was not announced earlier.

In general, despite the partial results of the summit, the euro-dollar pair today still shows a northern impulse, approaching the borders of the 14th figure. Such dynamics are due, firstly, to the renewed risk to risk in the foreign exchange market (the dollar index again sank to 96 points), and secondly, new rumors about the prospects for the Italian problem.

It is worth recalling that last week, it was reported that the Italians agreed to reduce the deficit by 0.2%, that is, to 2.2%. And this is despite the fact that the European Commission initially demanded that the deficit is laid at the level of 0.8%. Therefore, this minimal concession disappointed Brussels, after which optimism on this issue came to nothing. Today, this issue has become relevant again, as the Italian press reported that the authorities are ready to revise the deficit level to the downside.

According to preliminary information, we are talking about 1.9% - 2%, allegedly the Prime Minister of Italy Conte suggested to reduce the rate to these levels, while members of the coalition government agreed with this decision. It should be noted that during the months of negotiations, the European Commission also moderated its appetites in this matter. According to rumors, they have now raised the maximum allowable deficit level to two percent. Thus, if the above information is confirmed, it will speak about the high probability of resolving the Italian problem, which "hangs anchor" on the euro-dollar pair, against the background of other problems.

Thus, the European currency has a chance for corrective growth across the entire market. If Italy finds a common language with Brussels, the disappointing economic reports will fade into the background. In addition, the slowdown in inflation and GDP growth will not affect the fate of the incentive program. QE will be completed this month anyway. As for the future prospects of monetary policy, they look too distant (the rate increase by the ECB is not expected until the autumn of 2019).

If we look at the technical picture of today, the bulls of the pair need to gain a foothold above 1.1365 (Tenkan-Sen line, coinciding with the Bollinger Bands middle line at D1). In this case, the Ichimoku Kinko Hyo indicator will generate a Golden Cross signal, which will open the way for further growth, to the mark of 1.1460 (the top line of the Bollinger Bands on the same timeframe).