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Poor eurozone data was a burden too heavy to carry for the euro, which fell to new 5-week low against the U.S. dollar. The latter has recently enjoyed sizeable bids on expectations that the wisdom of QE in the U.S. is losing its momentum, and that sooner rather than later, Bernanke and Co. may start to slowly withdraw the stimulus package.

From the looks at the EUR/USD chart on Wednesday, and in hindsight, the picture was quite depressing, with a daily bearish engulfing bar printed suggesting that further gains were viable. Materializing Thursday's losses was a "3-hour affair" in the early hours of European trading, after eurozone PMIs read-outs came below consensus, raising calls for a contraction in the eurozone Q1 GDP. According to economists at NAB, "the data IS suggesting a contraction of 0.3%, after the 0.6% decline in Q4."

During the "up the stairs" phase in the pair, mostly comprised between December and January, the key drivers feeding buyers appetite were upbeat European fundamentals coupled with the ECB's hold stance, further strengthened, as BKAM co-founder Kathy Lien points, "by the consolidation of their balance sheet through LTRO repayments."

In the second phase, "Euro back to reality", Kathy notes how "economic data has taken a turn for the worse" and, as she says, "the Fed is thinking about maybe even shrinking its balance sheet by the end of the year", suggestive of some potential trouble ahead. She predicts that if today's German IFO comes weak, EUR/USD may see more downside.

Calls for the next few session seem to suggest that the EUR/USD is poised to trade heavy, with the upside quite limited by an increasing committed seller's side.

Fan Yang, chief technical analyst at FXTimes, notes, that unless above the 1.33 pivot point, "the bearish trend remains strong, potentially targeting the 38.2% retracement of the rally from July to Feb (1.2041-1.3710) at 1.3072, which could be the rest of this week's short-term target."

Our FXstreet.com technical specialist, Gonçalo Moreira, against the backdrop of increasing calls for a higher EUR/USD pre-FOMC, wrote that the recent rise in the Euro had been "a short-term trader's order-driven rally", adding that one should "doubt long-term players are adding to euro long positions", recommending to "think contrarian to headlines." So far, price activity seems to have justified Mr. Moreira's view, who showed his skepticism about the upside potential in the euro.

Highlighting his successful recommendation, is of little value in hindsight, yet the bottom line here is that, while current views are now pointing for a downgrade in the Euro value in the near future, getting stuck in that idea may damage one's account.

So, on the other side of the equation, while odds for a significant rise in the EUR/USD have dissipated, upward adjustments intra-day are a second scenario important to consider. According to Valeria Bedmarik, chief analyst at FXstreet.com, "in the 4 hours chart technical readings start to show signs of exhaustion to the downside, still in oversold territory." If bulls manage to consolidate above the prior upswing at 1.3230, that can heightened the risk for a potential retest of 1.3270 breakout level.

Source: EUR/USD, Bearish Storm Set To Continue?