After both houses of the Italian Government ratified the proposed austerity measures over the weekend, and Prime Minister Berlusconi resigned and Mario Monti was appointed as the Prime Minister-designate (ahead of forthcoming elections), let's notice that the Euro has taken a nosedive from Sunday evening's (euphoric?) high at 1.3815 (off of last Thursday's breakdown low at 1.3480).

The resumption of Euro/USD weakness keeps intact the Oct-Nov topping pattern that identifies 1.3815/80 as the upper resistance zone of the "Right Shoulder" and 1.3520-1.3480 as the lower support zone of the initial breach of the "neckline area" originally at 1.3660/10.

Whichever side of the new demarcation zone is violated and sustained has the potential to send Euro/USD either to 1.4300 or 1.3000 thereafter.

As for the e-mini S&P 500, it continues to take its cue from the Euro/USD, and this morning we notice has reversed from its Oct 27 resistance line at 1270.50, which so far has pressed the index beneath key near-term support at 1256.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.