  • Widening Italian-German bond yields exert fresh downward pressure on the EUR.
  • Goodish USD rebound from near two-week lows adds to the downward momentum.
The EUR/USD pair extended its retracement slide from near two-week tops and has now eroded a major part of previous session up-move.
The pair stalled its recent goodish recovery move from YTD lows and met with some aggressive supply after hitting an intraday high level of 1.1472, snapping five consecutive days of winning streak.Â
Growing concerns about Italy’s fiscal health, reinforced by widening Italy-German bond yields, turned out to be one of the key factors prompting some fresh selling around the shared currency.
Yohay Elam, FXStreet’s own Analyst explains: “Markets are reacting to the ongoing standoff between Italy and the European Commission over the Italian budget. Rome insists on a 2.4% budget deficit while Brussels demands 2%. The ball is now in the European court: the EC is expected to respond to Italy’s response to the rejection of the budget. They may consider disciplinary action.â€
Adding to this, the recent US Dollar bearish pressure, triggered by the Fed Vice Chairman Richard Clarida’s dovish comments on Friday, now seems to have receded and further collaborated to the pair’s intraday slide of nearly 60-pips.
Meanwhile, the latest leg of a sudden fall over the past hour or so could also be attributed to some cross-driven weakness, stemming out of a goodish fall in the EUR/JPY cross amid the global flight to safety, which tends to underpin the Japanese Yen’s safe-haven status.
Currently trading around the 1.1420-15 region, traders now look forward to the US economic docket, featuring the release of housing market data, in order to catch some short-term momentum play.
Technical outlook
According to Yohay Elam, “1.1395 held the pair down in mid-November and was a swing low earlier in the month. The former double-bottom of 1.1300 is next down the line.â€
“Looking up, 1.1470 was the high earlier in the day. 1.1500 was the high point in November. 1.1550 and 1.1620 were high points when the trended lower in October,†he added further.
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