A change in the main trend that prevailed until recent sessions seems to have started gathering pace amongst euro traders. Solid prove of that was illustrated in the stubbornness of the EUR/USD after today's notable improvement in February German IFO series, which remained stuck around 1.3200/20 and just moving a few pips in the wake of the release. The European Commission growth forecasts, as expected, left no room for surprises, so it seems EU officials have their both feet on the ground this time.
Surely the single currency would be more concerned (should be) about the Italian elections due over the weekend and the U.S. "sequester" that kicks in on March 1st.
… 1.30 is looming
On the cards there is only time between price action of the single currency and the next big risk events, as the euro docket for the next week, however interesting, lacks the potentiality to trigger meaningful moves in the cross or to affect investors' sentiment in any way.
Furthermore, at this point, and back to Italian elections, the only outcome that can effectively hit the markets would be if former PM Silvio Berlusconi comes victor. Other than that, the results would be in line with the broader consensus, and may trigger a temporary correction higher, albeit framed within the broader bearish picture.
Much more relevant would be the U.S. fiscal situation and its direct consequences on the U.S. economic activity if both Republican and Democrats do not come to an agreement before March 1st. In addition, the uncertainty that reigns at the moment regarding such scenario has started to fortify the greenback, aside from the recent boost by the FOMC minutes.
In the technical realm, the single currency is now navigating the area around 1.3200/20, well into the cloud, and with a RSI still reading above the 30% threshold, we can infer that the downside has yet room to extend. Reinforcing that idea arises the recent breach of two uptrend lines (7-month and 3-month), indicative that further downside would be the most likely outcome. The next interim support comes at 1.3146, where lies the 100-day moving average, en route to the 38.2% Fibonacci retracement of the July 2012 lows - February 2013 highs, at 1.3074. Should the bearish impulse continues, then the cross would target the region of 1.2880/90, where converge the 50% retracement and the 200-day moving average.