EUR/USD's rally from the Jan. 10 low is close to being completely erased, but shorts still have some work to do to gain greater control.
December's very upbeat U.S. housing starts nLNSHCEGGW, which hit a 13-year high, helped EUR/USD shorts gain traction.
The data drove Treasury yields higher and eurodollar and fed funds futures prices lower.
The rate moves widened German-U.S.
yield spreads further in favor of the dollar and lowered the probability for Fed rate cuts FEDWATCH.
The data also led to broad U.S. dollar buying, which helped pull EUR/USD below 1.1100.
EUR/USD shorts are probing a slew of support in the 1.1060-1.1105 zone.
Technical supports from the daily cloud top and base, 55-DMA, head-and-shoulder neckline, trend line off October's low and the 50% Fib of 1.0879-1.1240 all sit in that zone.
Key daily lows from Jan. 10 and Dec. 20 also reside there.
EUR/USD's fall back below the 10-, 21- and 200-DMAs as well as falling daily and monthly RSIs suggest shorts have a good chance of breaking below the support zone.
Should that support give, way recent EUR/USD longs are likely to throw in the towel and exit their positions while shorts' confidence grows.
A test of October's low cannot be ruled out should the support break.
chart: Click here