The euro remains under pressure as EUR/USD extends its decline for a fifth consecutive day, retreating to critical support levels near the monthly range lows. Despite the bearish momentum, the pair continues to trade within the December range, leaving traders focused on an impending breakout as the Federal Reserve’s interest rate decision looms.

Key Technical Highlights:

• Support Levels: Immediate support is at 1.0446/66, a confluence zone defined by the December opening range low, the 2023 low-day close, and the 61.8% retracement of the November rally. A decisive break below this zone would signal the resumption of the broader downtrend, targeting the 50% retracement and the 2017 low at 1.0405/06 and 1.0340, respectively.
• Resistance Levels: Initial resistance is clustered around 1.0587-1.0602, encompassing the 2023 low-week close and the April low. Beyond this, key levels at 1.0670/81 (38.2% retracement and June low-day close) and 1.0730 (November high-day close) would need to be cleared to suggest a more significant reversal is in play.

Technical Analysis:

On the daily chart, EUR/USD remains within an ascending pitchfork pattern traced from early December. The lower parallel aligns with the key support zone at 1.0446/66, where price action may find temporary stabilization. However, a sustained close below this support would pave the way for deeper losses, potentially extending to the mid-1.0300s.

On the 4-hour chart, the pair’s inability to capitalize on bullish catalysts post-ECB underscores the bearish bias. Momentum indicators reinforce this outlook, with lower highs and lows dominating the price action. A rally above 1.0600 would be required to challenge the bearish narrative, but upside remains capped unless a break above 1.0670/81 is achieved.

Fundamental Outlook:

The euro’s near-term trajectory hinges on upcoming economic developments, particularly next week’s Federal Reserve decision. Markets are bracing for the Fed to adjust its interest rate and economic projections, which could either reinforce the dollar’s dominance or offer a reprieve for the euro. Additionally, traders will closely monitor the eurozone’s economic data releases for further clues on the region’s recovery.

Trading Strategy:

• Bearish Bias: Continue to favor selling rallies while EUR/USD remains below 1.0600. A break below 1.0446 could open the door to targeting 1.0405 and potentially 1.0340.
• Bullish Scenarios: A sustained break above 1.0670/81 would signal the potential for a broader reversal, targeting resistance at 1.0730 and 1.0778/82.

As the week progresses, traders should stay nimble, particularly with the Fed’s decision set to influence the dollar’s broader direction. The weekly close will provide critical guidance on whether EUR/USD can hold its December range or succumb to further bearish momentum.