It looks to be another week that is set to be dominated by the USD. The EUR/USD cracked key support last week, before pulling back in late trade.

This week much of the attention will be on some of the economic data releases that will impact the USD. That is clearly the FOMC interest rate decision and US unemployment. Both data points have the potential to keep markets a little subdued early on in the week.

However, we are also going to get a look at Eurozone inflation. The expectation is for 1.3% YoY. If this or any of the accompanying numbers look a little shaky, then the EUR/USD might be in some trouble. The key issue for Mario Draghi and the ECB is inflation, or a lack of it. They will not want to see anything too weak, and the EUR/USD might well fall on the back of a dovish Draghi from last week.

Technical Outlook

Our support levels that had been holding the EUR/USD up for some time are now broken. And the momentum appears to now to be to the downside.

With that in mind, we need to start identifying some new levels to work with. I think we might see some weak support at 1.2050.

There’s a clear swing low around the 1.1950 level which will be my next major downside target.

I’ll be focused on selling the current pullback this week. An entry around 1.2150 would be ideal. The key will be that the price action suggests there’s selling in that region and the previous support level, is acting as resistance.