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  • US Dollar Index reverses early losses in the NA session.
  • Italy – Germany 10-yield Bond spread rises to the highest level in more than two months.
  • EUR/USD loses more than 100 pips for the week.

After moving sideways near mid-1.13s for the majority of the day, the EUR/USD pair came under a renewed selling pressure in the NA session and slumped to its lowest level in two weeks at 1.1321. As of writing, the pair was trading at 1.1325, losing 0.13% on the day.

Disappointing data from Germany and the euro area and the ECB’s cautious outlook in its monthly Economic Bulletin this week reminded investors of the economic slowdown in the euro area. Reflecting the markets’ negative attitude toward the eurozone, the 10-year Italy – 10-year Germany bond spread rose to its highest level since early  December and weighed on the shared currency. Although earlier today the data from Germany showed that the trade surplus rose to €19.4 billion in December from €18.9 billion in November, it did little to nothing to help the euro find demand.

On the other hand, the greenback’s impressive performance throughout the week forced the pair to push even lower. Since last Wednesday’s sharp drop caused by the FOMC’s dovish shift in its language, the US Dollar Index closed every single day in the positive territory and is now looking to extend its rally into the 7th straight day as it adds 0.06% on the day at 96.63.

Technical outlook via FXStreet Chief Analyst Valeria Bednarik

In the daily chart, the pair fell well below all of its moving averages, which maintain strong downward slopes, while technical indicators lack directional strength right below their midlines, favoring another leg lower without confirming it. The 1.1270/80 region is now the immediate support ahead of the mentioned 1.1215. Once below the next probable bearish target is 1.1160. An immediate resistance comes at around 1.1390, with more relevant ones being the 1.1430 and 1.1460 price zone. Gains beyond this last seem quite unlikely unless the market gets a reason to sold-off the greenback.