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  • The EUR/USD has lost more than 300 pips in the last six days and is trading below the key 61.8 percent Fibonacci retracement support.
  • The 14-day relative strength index (RSI) is showing scope for further losses.
  • The investors will take cues from Italy-German bond yield spread and US-German yield differential and Italy headlines.

The EUR/USD closed below 1.1497 (61.8% Fib R of Aug. 15 low/Sept. 24 high) yesterday, strengthening the bear grip.

At press time, the currency pair is trading at 1.1472 – down close to 350 pips from the recent high of 1.1815. More importantly, the 14-day relative strength index (RSI) is still not reporting oversold conditions, despite six-day losing streak.

So, it seems safe to say that there is room for a further drop in the common currency and that will likely happen if the spread between the 10-year Italian government bond yield and the German 10-year bund yield moves to fresh five-year highs above 302 basis points.

The EUR could also come under pressure due to the widening of the US-German yield differential. As of writing, the 10-year US Treasury note is yielding 270 basis points more than its German counterpart, the highest since 1981.  

EUR/USD Technical Levels

Resistance: 1.1497 (61.8% Fib R of Aug. 15 low/Sept. 24 high), 1.1526 (Sept. 10 low), 1.1535 (10-day moving average)

Support: 1.1422 (76.4% Fib R of Aug. 15 low/Sept. 24 low), 1.14 (psychological level), 1.1327 (200-week moving average)