The short dollar squeeze is starting to take a look at some key levels

EUR/USD D1 02-02

Despite plenty of narratives being put out on the dollar faltering this year, it hasn't quite been the case so far over the past few weeks. The latest push higher in the greenback today sees EUR/USD fall to a two-month low below key support @ 1.2059-64.

A firm break/close below that region will set sellers up for a potential retest of 1.2000 and possibly the 100-day moving average (red line) @ 1.1962 next.

There is still a solid argument for EUR/USD to keep between 1.2000 and 1.2500 in trading this year and while we are nearing the lower-bound of that range, it may not necessarily be where this short dollar squeeze may end.

As mentioned earlier, timing matters. The idea that the dollar will falter hinges on the Fed put being at play but the market has largely ignored that for quite a number of weeks now - not even the FOMC meeting was enough to keep the market focused.

Adding to the euro's woes is the potential downside break in EUR/GBP, which could accelerate further in the coming weeks as well:

EUR/GBP W1 02-02

The pair is threatening a break below 0.8800 and holding below the key weekly moving averages could point to further downside momentum in the euro - which inadvertently would not be good news in EUR/USD if the dollar holds up as it has been.