A number of signals are indicating that EUR/USD could continue to weaken in the short-to-medium term:
- The pair has breached the 200-day moving average, which is watched by technical/algorithmic and fundamental analysts alike
- Stronger US macro data compared to Europe favours the greenback (keep an eye on the non-farm payrolls on Friday for confirmation)
- We’ve seen a strong bias in favour of USD calls in the options market during the past week
- In terms of position unwinding, euro long positioning is still stretched, according to a note from UBS
EUR/USD is currently battling around the 1.20 level. A break below 1.1980 would be outright bearish for an acceleration towards 1.1915. Above this, the pair could find resistance at 1.2050 (the 200-day MA) and 1.2155 (the long-term range low).
Looking at the longer-term weekly chart, EUR/USD could potentially go as far as 1.17, at the 38.2% retracement level and near the Ichimoku cloud.