As of writing, EUR/USD is trading at 1.2264 - down 2.32 percent from the recent high of 1.2556.
Over the last two weeks, the common currency has had a tough time holding on to gains above 1.24, possibly due to the realization that the European Central Bank (ECB) won't raise rates next year. The upside break in the Euribor futures indicates the investors are pricing-in ECB's dovish talk.
Further, the Eurozone inflation expectations, as represented by as measured by the 5y5y swaps, have dropped to 1.68 percent - the lowest level since November.
So, the EUR side of the story looks weak. Meanwhile, the USD will likely surge across the board if the Fed revises the 2019-2020 interest rate forecasts higher. In such a scenario, the EUR/USD could drop to 1.20 and may extend losses further.
The weekly chart shows the odds are stacked in favor of the bears.
Weekly chart
Back-to-back doji candles with long upper shadows and a bearish 5-week MA and 10-week MA crossover, coupled with the negative MACD indicates the EUR/USD will likely take out the ascending trendline (drawn from the April 2017 low and November 2017 low) support and drop to 1.20 (psychological support) in the short-run.
On the higher side, only a close above 1.2446 (March 8 high) would abort the bearish view and could yield a re-test of 1.25-1.2556 (Feb. 16 high).
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