The Euro bounced above 1.0700 barrier on quick recovery after overnight’s sharp fall, when it hit fresh 20-month low at 1.0504. The single currency slumped after Italian voters rejected a referendum on constitutional changes backed by the government, prompting Prime Minister Matteo Renzi to step down.

Despite concerns about the health of Italian banking sector and expected consequences on referendum’s ‘no’ vote, Euro swift recovery signaled that referendum outcome has been already priced in by markets.
The single currency was up 0.63% from opening and made total gains of 2.1% from daily low at 1.0504 to the session high at 1.0728.

Strong recovery that dented the upper pivot at 1.0700, sidelined immediate downside risk towards key support at 1.0461, shifting near-term focus higher, but close above 1.0700 handle is required to confirm scenario.
The dollar/yen stayed tall at the beginning of American session, establishing above 114.00 handle and being up nearly 1% from Monday’s opening. Fresh upside action confirmed an end of near-term correction that was contained at 112.85, keeping intact strong bullish structure that looks for fresh extension above 115.00 barrier. The pair was last at 114.36, just ticks below session high at 114.45.

Cable remained firm on Monday and regained levels above 1.2700 barrier, following shallow correction to 1.2650 zone. However, the pair was up 0.32% for now but is showing again difficulties to firmly break above daily cloud top, which offers significant barrier at 1.2720.

Today’s upbeat UK Services PMI numbers for November (55.2 vs 54.2 forecast), helped pound to keep high levels,
From technical point of view, sterling remains supported and looking for close above daily cloud top, for resumption of recovery towards 1.2800 zone initially, with 1.2890 barrier seen in extension.

Strong demand for the dollar, boosted by solid US jobs data in November and widely expected US rate hike in December, kept Gold at the back foot on Monday. The yellow metal was in red for four straight weeks and is holding near fresh low at $1160 on Monday, showing scope for further losses towards next supports at $1150/45.

Comment from the president of Fed Bank of New York William Dudley, who said on Monday that the U.S. economy was expected to grow at a pace above its sustainable long-term rate which in turn would support a gradual tightening of monetary policy and that the pace may be quicker than originally anticipated, further firmed expectations of rate hike in two weeks, when FOMC December’s meeting is due.

European stocks were higher on Monday and hit their highest level since late October, shrugging off worries over political instability in Italy, with the broader market underpinned by gains in banks as investors sought to snap up bargains in the battered sector.

Italy’s banking index fell as much as 4% in early deals, on worries that efforts to clean up bad debts and raise capital could be derailed by renewed political uncertainty. The index, which has lost about half of its value this year, briefly turned positive and was last down 0.7%.

Dax was among top winners on Monday, being up 1.89% from opening.
At the same time, CAC40 index rose 1.63% and spiked briefly above 4600 handle earlier in the session.

Britain’s FTSE100 was up 0.69% at the time of writing, after hitting session high at 6799, at early hours of European session that marked gains of 1.61%., Market Analysis