The single currency fell again victim of negative headlines out of Europe, with four main themes at the forefront. The resignation of Cyprus' finance minister shook the euro, which adds to the continuous political deadlock in Italy, a country without the ability to properly implement any significant economic reform until a new government is formed.
To make matters worse, earlier in Europe, we also had PMI figures in both Spain and France indicating further contraction, with the disappointing combo being completed with the EU jobless rate, which remains depressed at 12%.
On the euro front, traders' focal point of attention is set at tomorrow's (Thursday) ECB monetary policy decision, with the danger being that "it could be warming to the idea of additional stimulus, with a very good chance of Mario Draghi sounding more cautious at this week's ECB meeting, which would be negative for the euro" says Kathy Lien, co-founder at BKAssetManagement.
On the USD domain, a potential currency shaker comes today (Wednesday) in the form of two risk events, first the ADP employment change at 13.45GMT followed by the ISM non-manufacturing report at 14GMT. Once both numbers are out of the way, USD traders will shift the focus on the always important non-farm payrolls, with the data becoming key for future QE expectations in the U.S.
Technically, according to Valeria Bednarik, chief analyst at FXstreet.com: "The bearish scope remains intact, with a break below $1.2790 favoring a retest of $1.2750 lows ahead of $1.2720, while approaches to $1.2880 remain selling opportunities."
A banking institution supporting Valeria's bias is Rabobank, which refers to the recent Cypriot crisis as a clear distabilizer for the lost tranquility in the European Union. Following Cyprus developments, "the concept of banking sector bail-in as an alternative to taxpayer support in the event of a banking collapse is now settling into the awareness of Europeans."
In this line, "if bank depositors do respond to credit ratings, many weaker banks in the eurozone region could find themselves subject to another bout of capital flight." That's mean lots of euro sellers. "In effect, through the Cypriot crisis, investors has been dealt a strong reminder that the eurozone crisis is alive and kicking."
EUR/USD is likely to be pressured down, the bank says; "We remain sellers of EUR/USD on rallies for now," concluded Rabobank.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.