The EUR / USD pair dropped to a low of 1.0505 in early Asia in response to Renzi’s humiliating defeat in the referendum. Renzi announced his resignation, which heightened the political uncertainty cross the Eurozone.
However, a ‘no vote’ victory was largely priced-in as mentioned in my report titled “Italian referendum and the case for EUR/USD parity”.
The 2-year German yield suffered moderate loss to -0.747% before recovering to trade largely unchanged on the day around -0.711%. The record low of -0.769% was hit on November 29. This is clear indication that Renzi’s defeat is no surprise to the markets.
The daily chart says today’s rally could be extended to 50-DMA over the next few days-
Source: Netstation (www.netdania.com)
The daily candle is now a “bullish outside day candle”. Today’s candle has engulfed every candle since November 18.
This suggests the pair has bottomed out at least for the short-term and the common currency could test 50-DMA seen at 1.0913.