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Forex: Below 1.2995 EUR/USD could move toward 1.2660 - DailyFX

What's bad about the Italian election results yesterday was not the fact that anti-austerity candidates moved up in the polls and received substantial support, according to Christopher Vecchio, Currency Analyst at DailyFX, "the bad part of the results is that there is now a 'hung parliament,' or divided government".

In the analyst's view, continued political uncertainty could force Italy into accepting the terms of the OMT, in order to calm investors. "This may have limited downside in Euro-based pairs now; but don't be surprised by further downside over the coming weeks", he says.

"As a result, the EURUSD has broken the major uptrend off the July and November lows, breaking at 1.3200/20 yesterday, leading to a cataclysmic sell-off into the January swing lows at 1.2995/3035", Vecchio comments. "Although the EURUSD is near oversold conditions, we note that momentum amid political distress tends to supersede stretched technical indicators. If 1.2995 breaks, a move into 1.2875 and 1.2660 shouldn't be ruled out by the end of 1Q'13."

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