EUR/USD drops back to 1.1425 amid rising Italy-DE yield spread

• Rising Italian-DE bond yields spook Italian banks, knock-off the Euro.
• All eyes on the US housing market indicators for near-term trading opportunities.

The EUR/USD pair came under aggressive selling pressure last hour and quickly eroded 40-pips to hit daily lows near 1.1425 as the Italian bond yields spiked on renewed concerns over the Italian economic growth.

The main drag on the Euro is the widening yield spread between the Italian-Germany (DE) 10-year government bonds, which now touch 335 bps. A move above 400 bps will spook the Italian banking sector and could trigger a fresh banking turmoil for Italy.

Meanwhile, the risk-off trades on the European equities lifted the safe-haven US dollar from multi-day lows, further adding to the weight on the spot. More so, the sentiment around the common currency was dented by the latest ECB Watch headline, citing that the Eurozone money markets are no longer fully pricing a 10 bps ECB rate hike in 2019.

Markets now look forward to the US housing data for fresh dollar trades while the European politics will continue to play a key role across the fx board.

EUR/USD Technical Levels