The EUR/USD rate does look to have over-extended to the upside during the end-2023 US dollar sell-off and if we are to see a realignment of spot to relative short-term rate levels, then there is scope for EUR/USD to continue drifting lower toward the 1.0700 level.

Given our analysis shows an overshoot of EUR/USD spot relative to rates spread, we see greater scope of US Dollar strength on stronger data than weakness on weak data.