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- EUR/USD approaches key support

- Westpac recommend buying EUR/USD

- Goldman Sachs techs say being 'short' EUR/USD unnatractive

The Euro-to-Dollar exchange rate (EUR/USD) has this week fallen to its lowest levels since November when it achieved a low of 1.1257 on Tuesday, February 12.

The decline has set tongues wagging in technical circles as analysts eye significant support levels in the local surrounds which could ultimately thwart further declines and trigger a recovery.

Indeed, Sheba Jafari, a technical analyst at Goldman Sachs says, "there are so many pivots before 1.1305 and 1.1234 that the risk/reward of being short seems less attractive."

Image courtesy of Goldman Sachs.

"The area between 1.1305 and 1.1234 includes the trend across the lows since November as well as a series of prior low since August and an ABC target from the January high. The likelihood of holding/reversing above this area seems to be quite high," says Jafari.

Jafari says EUR/USD would have to break lower than 1.1234 to really think the market might finally be breaking down.

"Until that happens, it seems sensible to play the range with resistance all the way up at 1.15, near where the 200-dma currently trades," says Jafari.

Also eyeing an opportunity on EUR/USD is Richard Franulovich, a strategist with Westpac Markets, the investment banking division of one of Australia's largest lenders.

Franulovich has issued a trade idea to clients that suggests buying the Euro and selling the Dollar at EUR/USD 1.1280.

The trade is premised on a combination of both technical and fundamental observations.

"Weak Eurozone data into 2019 has prompted a notable cooling in growth expectations; that is now priced in bringing EUR/USD to the lows of its range of the past six months. Short-term momentum indicators have been oversold and are now showing potential for a near term turn," says Franulovich.

Positioning amongst traders on global currency markets also looks compelling to the strategist, who notes a sizeable net short position on the Euro, amounting to the largest bet against the currency in two years.

When positioning gets stretched the prospect for a sizeable 'short covering' rally increases dramatically. Any good news for the Euro / bad news for the Dollar could prove to be a trigger for such a 'short covering' move.

Westpac note that while the U.S. economy has weathered the Q4 tightening in financial conditions and the shutdown in its stride, "other important data suggest there has been more sustained damage to the economy."

A two-year low in the NFIB small business sentiment is one indicator Westpac are eyeing.

Franulovich is eyeing a target for the trade idea at 1.1500.

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