JP Morgan - "The setup for the broad USD picture weakened over the past week while presenting another important test for the short term view. In this regard, the failure against key initial resistance levels has shifted the focus back to critical support levels which should define whether a recovery phase or deeper retracement can develop. While the current oversold framework favors a recovery phase, the late-week decline raises some doubts. In turn, we highlight the key markers that should confirm the onset of a deeper extension for the USD. As mentioned in recent updates, the setup for the DXY is an important focus. After failing at the key 80.45/50 resistance zone, the 79.68/58 support zone is the critical test. This zone represents the December low and the 76.4% retracement of the rally from the October low. Again, a break above the 80.50 area which includes the 38.2% retracement from the January high as well as the mid-February breakdown zone is necessary to argue for a shift back to the range highs near 81.39/48. Another failure at initial resistance levels would suggest a growing risk of a break to the range lows which would imply a test of the October low. While the structure of the rally for the JPM USD Index suggests a better setup when compared to the DXY, key resistance levels are also holding. In this regard, the 85.40/45 area is the first important hurdle as it represents the early-Feb breakdown zone and the 61.8% retracement of the decline from the January peak. A push above this area is necessary to confirm the uptrend is back on track for another run at the 85.89 January high, if not a more sustained upside break. Moreover, this view is consistent with the setup for EUR/USD which is approaching the critical 1.3840/95 resistance area. This zone includes the downtrendline from the 2008 cycle peak and where we expect the current advance to retrace. Until a break of these levels, the two-sided risks are likely to prevail as we monitor key support levels for a potential bearish shift."