EUR/USD rebounds after refreshing YTD lows, back above mid-1.1800s

   •  Persistent USD buying continues dragging the pair lower for the fourth consecutive session.
   •  Italian political developments/softer EZ economic data does little to ease the bearish pressure.
 
The EUR/USD pair extended its downfall from Asian session high level of 1.1870 and dropped to fresh 4-1/2 month lows in the last hour, albeit recovered few pips thereafter.

A strong follow-through US Dollar buying interest, further supported by a goodish pickup in the US bond yields, was seen as one of the key factors dragging the pair lower for the fourth consecutive session on Wednesday.

The US President Donald Trump's decision to pull out of an international nuclear deal with Iran triggered a sharp rally in oil prices. Market participants now see rising oil prices to boost inflationary pressure in the US economy, which might eventually force the Fed to raise interest rates faster than currently expected and pushed the US Treasury bond yields higher. 

Meanwhile, political developments in Italy also kept the EUR bulls on the defensive, which coupled with softer European economic data, with the latest disappointment coming from monthly French Industrial Production and Italian Retail Sales data released today, did little to lend any support and stall the pair's retracement slide to its lowest level since December 22.

The selling pressure now seems to have abated, with near-term oversold conditions prompting some short-covering move and helping the pair to rebound around 30-pips from session low, back above mid-1.1800s. Later during the early NA session, the release of US Producer Price index (PPI) for April, a key highlight from today's relatively thin US economic docket, would now be looked upon for some fresh impetus.

Technical levels to watch

Any subsequent retracement is likely to find support near the 1.1800 handle ahead of the 1.1775-70 region. On the upside, momentum above 1.1870 level (session tops) might confront strong resistance near the 1.1900 handle, which if cleared might trigger a near-term short-covering bounce.