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The European currency extended its decline against the dollar on Thursday amid renewed signs the eurozone economy is struggling after the region's PMI came in lower than expected. Besides, the U.S. dollar remains underpinned expectations the Fed may stop providing monetary stimulus after yesterday's FOMC minutes.

"As markets continue to digest the news, the evolving view is that the minutes might not be quite as hawkish as first perceived, but they are still hawkish enough to have global equity markets under significant pressure today and the greenback and yen benefiting from the unsettled market backdrop", says Nick Bennenbroek, Head of Currency Strategy at Wells Fargo Bank. "Next week's testimony from Fed Chairman Bernanke now takes on added importance as a barometer of whether the minutes simply reflect ongoing discussion, or a real changed in the Fed's policy view".

Elsewhere, the pound fell to a 2 ½-year low versus the greenback although it managed to trim losses, while the yen strengthened dragging USD/JPY below the 93.00 mark. Stocks and oil are broadly lower on risk aversion, but gold advanced slightly.

Euro falls below trendline support

The EUR/USD broke below the 1.3200 psychological level, and more importantly below an ascendant trendline coming off July 2012 lows, turning the immediate term and longer term bearish for the cross. A close below this level would reinforce the bearish perspective with 1.3110 as next target (100-day SMA) ahead of the 1.3070 zone (38.2% retracement of the 1.2041/1.3710 rally).

On the upside, the 1.3235 area offers immediate resistance to the EUR/USD, but the pair would need to regain the 1.3300 level to ease the immediate pressure.

In this regard, the BBH analyst team notes that "serious technical damage" is being inflicted. "The euro is falling through the uptrend drawn off last July (Draghi-induced) lows", they commented. "It comes in just below $1.3200 today. The next technical target is near $1.3070-80".

Meanwhile, Wells Fargo analysts note that for the balance of the week their view remains tilted to U.S. dollar strength and foreign currency weakness "as market potentially remain somewhat unsettled after the Fed comments, and depending on whether Germany's IFO confidence survey shows similar weakness to today's eurozone confidence data".

Source: Bearish Pressure Increases On The Euro