Why the euro could fall even further

It's been a one-way euro trip lower. The common currency has fallen every day this week, and is now near the lowest levels in 12 years.

Now, currency traders are keenly watching American economic data, as better news about the economy could lead the euro drop to intensify.

It all comes down to expectations about the Federal Reserve's next move. Most market participants believe the Fed will raise short-term rate targets this year. That should help the US dollar and hurt the euro, as it means that holding dollars will produce greater returns than holding euros, increasing demand for the greenback.

Expectations about a June Fed move have been tamped down due to a bevy of soft economic readings, most conspicuously the March jobs number. But this week, the Fed minutes and hawkish words from William Dudley have told investors that a June hike is still on the table, according to Boris Schlossberg of BK Asset Management.

Dudley, the generally dovish New York Fed president, told Reuters on Wednesday that depending on how the data develops, a June move could be "still in play."

Read More: American stocks are the world's worst this year

In the week ahead, Schlossberg says the biggest data point he will watch is Tuesday's retail sales report. If it indicates that "the US consumer finally started to spend, then dollar bulls run wild, and we may see 1.0500 break" on the euro, which is currently a bit below 1.0600 per dollar.

That's because better data could serve to convince traders that the much-awaited Fed move will come sooner than previously anticipated.

However, some traders say the move is overdone.

"This short-term move is technical, so I expect to see the euro bounce and the dollar pull back off of the recent move," said David Seaburg, head of equity sales trading with Cowen and Co.

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