EUR/USD risks losing LT trendline on upbeat US wage growth data

• The EUR is flirting with a long-term (LT) ascending trendline support.
• Focus on Italian-German yield spread, stocks.
• Could suffer downside break if US wage growth beats estimates.

The common currency is on the back foot ahead of the March non-farm payrolls release.

The EUR/USD fell to long-term ascending trendline (drawn from July low and Dec. 18 low) on Thursday, courtesy of downward revisions of the Eurozone PMIs and weaker-than-expected German factory orders and retail sales print.

Also, the sharp pullback in the German 10-year yield in March indicates the markets have scaled back expectations of ECB tightening.

Further, Italian political uncertainty could play spoilsport. The Italian-German yield spread will likely widen, pushing the common currency lower if the far-right Lega warms to overtures from the anti-establishment 5-Star Movement (M5S) to form a coalition government in Italy.

And last but not the least, the currency pair is trading below its 5,10, 21 and 50-day moving average (MA), indicating a short-term bearish setup. 

• Read: EUR bearish bias in the options market strengthens

So, the common currency looks set to take out the long-term ascending trendline support, especially if the US wage growth and workweek components beat estimates. On the other hand, a dismal wage growth number could put a bid under the common currency, thus ensuring the trendline support is defended.

EUR/USD Technical Levels

A close below the ascending trendline support would confirm the bearish reversal and allow a sustained drop to 1.2154 (March 1 low) and 1.2092 (Sept. 8 high).

On the higher side, a rebound from the trendline support and a convincing move above 1.2345 (April 2 high) would signal bull revival and open the doors to 1.2476 (March 27 high) and 1.25 (psychological hurdle).

Daily chart