After a slow start to the trading year, the Greenback is showing signs of life vs the forex majors. Gains vs the Euro, Swiss franc, and the Canadian dollar have highlighted the session for the USD. The big mover-and-shaker has been the EUR/USD, plunging by nearly 50 pips.

The fundamentals behind today’s move in the EUR/USD are a bit convoluted. Even though Eurozone CPI (Dec) hit projections and Retail Sales (Nov) were strong, the Euro still lost ground vs the Greenback. Also, since the release of stronger-than-expected U.S. ISM Non-Manufacturing PMI (Dec) numbers, this pair has rallied. In any event, bearish sentiment is winning the day in the EUR/USD, generating a stiff test of several daily downside support levels.

EUR/USD: Technical Outlook

Today’s bearish breakout in the EUR/USD has brought a key technical area into play. The zone from 1.1150 to 1.1125 features three distinct support levels. If today’s settlement is above the 1.1142 level, then a bullish bias will be appropriate going into the Wednesday session.

Here are three support levels to watch in this market for the remainder of the trading day:

• Support(1): Daily SMA, 1.1142
• Support(2): Current Wave 62% Retracement, 1.1132
• Support(3): Bollinger MP, 1.1125

Overview: The economic calendar facing the EUR/USD is going to be relatively quiet until Friday’s U.S. Non-Farm Payrolls report. Aside from a few FOMC members conducting various speaking engagements, the news cycle is wide open for the next 72 hours.

In the event we see the bearish momentum stall out at or near daily downside support, then a position long may come into play for tomorrow’s session. Given the lack of economic events scheduled this week, holding long positions with the intermediate-term bullish trend is preferable to being short the EUR/USD.