The longer-term outlook for the common currency remains bullish as the dollar could suffer from political uncertainty in the US
The euro has been correcting lower from two-year highs for the third consecutive day on Thursday. The pair was rejected from the 1.20 psychological level and extended losses to one-week lows around 1.1788. In recent trading, the common currency managed to trim intraday losses and climbed back above 1.18. Still, the broader short-term risks persist while the overall bullish trend is still intact.
The recent sell-off in the euro came as the ECB chief economic Philip Lane said the currency’s ascent affects the central bank’s monetary-policy setting. Also, other ECB officials expressed concern over the euro’s strength. As a result, traders started to price in further easing in the regulator’s monetary policy. As a reminder, the next ECB policy meeting is scheduled for next Thursday. Ahead of the event, the common currency could stay under pressure amid a more cautious approach by market participants.
Also, EURUSD is pressured by stronger-than-expected economic data out of the United States, especially in comparison with economic updates in the Eurozone. Besides, the greenback looks oversold after the recent decline amid a lack of progress on the second fiscal stimulus package.
From the technical point of view, euro bulls are deterred by the 1.20 psychological level that acts as the key barrier on the way toward fresh long-term highs. However, the longer-term outlook for the common currency remains bullish as the dollar could suffer from political uncertainty in the US ahead of the November election.
In the immediate term, the pair needs to hold above 1.18 in order to avoid a deeper downside correction. On Friday, the US NFP employment report could affect USD pairs including EURUSD. If the figures surprise to the upside, the 1.18 level will likely turn into resistance by the end of the trading week. Otherwise, the pair could stage a rebound and trim recent losses.