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   “¢   Italian political jitters continue to weigh on the shared currency.
   “¢   Rising Italian/German bond yield spread adds to the selling pressure.

The selling pressure around the shared currency remains unabated, with the EUR/USD pair tumbling to 10-month lows during the early European session on Tuesday.  

The pair extended overnight sharp reversal from an intraday high level of 1.1728 and remained under intense selling pressure on Tuesday growing concerns about political uncertainty in Italy – Euro-zone’s third-largest economy.

The ongoing rout in the Italian bond markets, lifting the Italian/German 10-year bond yield differential to 264 bps, its widest since 2013, has been impacting negatively on the shared currency.  

Meanwhile, the market now feared that the upcoming election might deliver a clear mandate to Italy’s eurosceptic parties, which coupled with fading prospects of any ECB monetary policy tightening kept exerting heavy selling around the major.  

It would now be interesting to see if the pair is able to find any support at lower levels or bears maintain their dominant position, despite highly near-term oversold conditions and empty economic docket.

Technical levels to watch

Any subsequent retracement is likely to find support near the 1.15 psychological mark, below which the downfall could further get extended towards 1.1450-45 support area. On the upside, any meaningful recovery attempt might now confront immediate resistance near the 1.1575-80 region and is closely followed by the 1.1600 handle, which if cleared might trigger a short-covering bounce.