My view is that there is potential for further downside in the short-term for the EUR/USD, and I'm proposing a new trade idea to reflect this. I expect the pair to retreat towards the 200-day moving average support at approximately 1.0330. 

The recent decline in the EUR/USD can be mainly attributed to the USD strengthening, driven by robust US activity data and firmer inflation at the beginning of this year. As a result, market participants are becoming more optimistic about the Fed's policy outlook and are pricing in a more hawkish stance. The rise in US yields has been more significant than that of the euro-zone. The price action has also shown that the euro-zone rate market and EUR have already adjusted considerably to reflect the improving cyclical outlook at the beginning of this year. Although growth in the euro-zone was better than anticipated during the winter, the upside surprises in euro-zone activity data are beginning to diminish. The latest euro-zone PMI surveys for February will be monitored closely in the coming week to assess if business sentiment continues to improve. The euro-zone rate market anticipates a higher peak for the ECB, ranging from 3.50% to 3.75%. Nevertheless, the increasing euro-zone rates are having a lesser impact on boosting the EUR.

Short on EURUSD

Feb 21 2023

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