50-DMA Limits Sell-Off Inspired By Italian Political Drama

EUR/JPY sold off Monday as the eurozone's shared currency was hit by continued political uncertainty in Italy. The rate descended onto its 50-DMA, but rejected the average and stabilised around the Y126.00 figure.

• Italian PM Conte is expected hand in resignation after chairing the 9am Cabinet meeting on Tuesday. His resignation is seen as a tactical move, with Conte counting on Pres Mattarella to ask him to form another gov't.
• An unnamed Italian gov't off'l told BBG that the country's budget deficit may reach 9.2% of GDP this year, with the economy expected to expand just 4.5% Y/Y in the worst case scenario.
• Elsewhere, Cll'r Merkel's Chief of Staff Braun wrote in Handelsblatt that Germany must draft a plan to return to fiscal discipline. Braun argued that social insurance contributions should be capped at 40% of wages and tax increases should be avoided.
• In France, FinMin Le Maire warned that the growth target of +6.0% Y/Y will be difficult to achieve if another nationwide lockdown is implemented.
• EUR/JPY trades at Y125.90, a handful of pips worse off as we type. The 50-DMA at Y125.85 provides the initial layer of support, with Jan 18 low of Y125.09 coming up next. Bulls keep an eye on Jan 19 high of Y126.40 and a break here would bring Jan 12 high of Y126.87 into play.
• There is little of note on the regional economic docket, while ECB speaker slate features Centeno & de Cos.