EUR/USD: Market most oversold since 2015, eyes Italian yields and EZ CPI

• A corrective rally is overdue, the EUR/USD 14-day RSI indicates.
• A drop in Italian bond yields and a better-than-expected Eurozone CPI could put a bid under the common currency.

The EUR/USD pair fell to 1.1510 on Wednesday - the lowest level since July 20, pushing the 14-day relative strength index deeper into oversold territory (below 30.00).

As of writing, the RSI stands at 19.42 - the lowest level since March 2015 i.e. the pair is most oversold in over three years. Hence, a corrective rally could be in the offing and could be a sharp one if the Italian bond yields drop and the Eurozone preliminary CPI for May beat estimates.

The currency pair has been hit hard in the last couple of days on fears that fresh elections in Italy may deliver a stronger mandate to anti-EU parties.

In the US session, the focus would shift to US Q1 preliminary GDP estimate and ADP employment report. A weaker-than-expected data would force markets to scale back expectations of four Fed rate hikes this year and hence could weigh over the US dollar.

EUR/USD Technical Levels

As of writing, the pair is trading at 1.1535. The resistance is seen at 1.1549 (resistance on the hourly chart), 1.16 (50-hour MA), and 1.1640 (May 29 high). On the downside, support is seen at 1.15 (psychological level), 1.1429 (gradually descending 200-week MA), and 1.1409 (100-week MA).