EUR/USD rebounds after US confirms auto tariff delay, lacks follow-through

   •  Italian debt situation continues to weigh on the shared currency.
   •  A modest pickup in the USD demand adds to the bearish pressure.
   •  US auto tariff delay for 6-months provide some respite for the bulls. 

The EUR/USD pair quickly reversed a dip to fresh two-week lows, albeit lacked any strong follow-through and remained well below the daily tops. 

The pair extended this week's downward trajectory and remained on the defensive through the mid-European session amid fiscal risks related to Italy, particularly after the country's Deputy Prime Minister Matteo Salvini said that the government is ready to break the EU's ceiling of 3% debt-to-GDP ratio.

Adding to this, the US Dollar regained some positive traction, climbing to the 98.00 handle in the last, further collaborated to the downward momentum and dragged the pair to an intraday low level of 1.1158, albeit the latest trade-related headlines helped limit any further downside.

A White House statement said that the US President Donald Trump has delayed a decision on imposing tariffs on cars made by the European Union and Japan for 180 days, which was seen as one of the key triggers behind the pair's modest bounce in the last hour or so.

However, the market reaction to the latest positive trade-related headlines turned out to be rather muted and failed to provide any meaningful boost to the major, clearly suggesting that the near-term bearish pressure might still be far from over. 

As Yohay Elam, FXStreet's own Analyst writes: “The escalation in trade tensions overshadows economic data, but the University of Michigan's preliminary consumer sentiment index for May will be of interest. It is set to hold onto its high ground, thus projecting further robust consumer spending.”

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