Italian MIB Reverses Higher on Italian Budget Deal but Faces Obstacles on the Daily Chart

European stock markets have been declining continuously for most of this year and the other stock markets joined the bearish trend some time later. The Italian MIB40 has been leading the decline together with the British FTSE100. The FTSE has been declining because of Brexit, while the MIB has been falling as the sentiment deteriorated due to the Italian budget problems that the European Commission had.

But, it seems that the Italians have agreed to lower the deficit to 2.04% from 2.4% previously and the EU has accepted it. EU’s Dombrovskis confirmed earlier that a deal has been reached with Italy and the sentiment has suddenly improved.

MIB40 started turning bullish yesterday as the rumours suggested that both sides were close to reaching a deal and it continues to climb higher today as well. This index formed a support area around 18,400 in the last two weeks and has bounced from it now.

But, MIB40 faces an obstacle now. The price is right at the 50 SMA (yellow) on the daily chart. This moving average has been providing resistance before and it is a tough nut for buyers to crack. Yes, the Italian budget problem is over for now but it will come back to bite next year when Italy exceeds the deficit.

Besides, the Italian and the Eurozone economies are on a weak spot now, so there’s not much reason for European stock markets to rally. Brexit is another problem for Europe so I expect this and other stock indices to turn bearish again soon.

So, if you are looking to trade indices, this is a nice place to sell the MIB40. Although, I might go for the UK FTSE since Brexit is approaching and the UK looks set to crash out without a deal.

ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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