Downside Risk Potential For The Euro

FX:EURUSD   Euro Fx/U.S. Dollar
There is downside risk for the euro             as price action for EURUSD             failed to close above 1.1342, essentially creating an asymmetric double top with the fizzled mid-February rally.

The pair looks to fade back to the 200-day EMA near 1.1108. The rally in the dollar following its steep declines last week could cause a more pronounced slide as long as the DXY             remains supported (92.50 remains a key near-term support level ).

Next, traders are saw bunds bid while the U.S. 10Y remained rather muted, causing spreads to become the widest since last December.


The U.S. 10Y has held a relatively strong negative correlation with the dollar index             going back to last August. If the dollar remains supported, there will likely be dampened demand for U.S. paper outside of any significant headline risk that could spark demand.

If price action does not confirm a downtrend break above 1.1342, the euro             will likely slide against the dollar and challenge the minor uptrend created in December.

S/R levels remain key targets for advancement and pullbacks.

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Comment: EURUSD had been able to rally as sentiment towards a dovish Fed increased, causing pressure on the dollar and US treasuries bid. However, the pair has stagnated for the last seven trading days near 1.1385.

A break out could cause the euro-dollar to challenged 1.1560 or a pressured dollar could rally a bid causing a challenge of the broken downtrend.
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