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After closing at its highest level since late February the previous day, EUR/USD was unable to achieve any follow through and finished the New York session down 1.08% at $1.3035.

The theme throughout the day across global markets was "risk off", as the U.S. dollar Index once again regained its safe haven status closing sharply higher at 82.73. Economic data released during the U.S. session was not much of a factor, with the majority of EUR/USD losses incurring before the Beige Book release late in the New York session.

"The worst performing currency today was the euro, which dropped more than 1% against the U.S. dollar. No major economic reports were released but the combination of dovish comments from an ECB official and a more positive Federal Reserve Beige Book report was enough to drive the currency pair sharply lower" noted Kathy Lien of BK Asset Management.

Lien then went on to say, "the ECB is a central bank that likes to prepare the market for any potential changes in monetary policy which is why Weidmann's comments are so important because it could be the first of many to follow."

However, some analysts are not convinced the euro weakness will be long lasting, and see the pair to continue to be more of a range trade. According to Sean Lee of FXWW: "Levels around $1.2950 are likely to attract short-covering whilst $1.3200 is shaping as decent resistance, so play the edges of this range (although my bias remains bearish overall)."

Regardless of the catalyst for today's price action, the strength in the U.S. dollar Index is not too surprising given what is going on in other asset classes. For example, both Copper and Crude Oil WTI suffered another day of steep losses closed at new multi-year lows. The yield on the 10 Year Treasury note dropped to yearly low of 1.674%, and both U.S. and European equities suffered losses of nearly 2%.

Although the correlation between the EUR/USD and risk assets is not as high as in previous years, it's still hard to imagine the pair trading sharply higher on a day when commodities and equities are so out of favor.

There a few key levels market participants can keep an eye on to help clue them in at the next major move.

"Whether current movement is the kick start of a bearish run, will be confirmed if price breaks below $1.2970, a 23.6% retracement of the $1.3710/$1.2744 fall, opening doors then for a run towards $1.2880 price zone," noted analyst Val Bednarik.

From a longer-term technical perspective, it's worth noting that on the weekly chart it appears we may be setting up the right shoulder of a head & shoulders pattern which started back in September 2012. Although early in development, it looks like the neckline would come in right near the $1.2830 level. Should the pattern be confirmed later this year (weekly close below $1.2830), the implications are bearish and the measured move target is down near $1.1930.

Source: EUR/USD Reverses Gains As Concerns Re-Ignite Risk Asset Selling