EUR/USD is currently positioned between 1.1680 and 1.1690 following four consecutive days of declines, remaining below the 1.1700 level as momentum shows signs of weakening. On the daily chart, the 14-day RSI is positioned at approximately 42.6, which is below the 50 midline, indicating a neutral-to-bearish momentum, suggesting that this is not a healthy pause. While the RSI remains below 50, it is more probable that any recovery attempts will be met with selling pressure rather than leading to sustained upward trends. The price action supports this perspective: each attempt to rise toward 1.1700 has been swiftly limited, and the market is descending in a measured manner, avoiding any panic spikes. The configuration surrounding the moving averages indicates a distinctly negative outlook for EUR/USD. Current spot trades are positioned below the 9-day EMA at 1.1711 and slightly beneath the 50-day EMA, which is around 1.1682. The short-term EMA has begun to decline, and the 50-day line is showing signs of flattening, which is precisely the pattern observed when a previous rebound loses momentum. On the 4-hour chart, the pair is currently positioned below the 20-, 50-, and 100-period moving averages, while the 200-period moving average, located around 1.1670, serves as the initial significant dynamic support level. The price has been declining within a bearish channel that initiated following the late-December peak around 1.1805–1.1808. Current resistance levels are positioned above the market at 1.1711, followed by 1.1730–1.1743, and ultimately at 1.1808 and 1.1918, marking the peak since June 2021. Provided that EUR/USD remains under approximately 1.1710–1.1730, any upward movements are fundamentally corrections within a larger downward trend.
The dollar component of EUR/USD is bolstered by stronger US macroeconomic data. The ISM Services PMI for December rose to 54.4, indicating a robust services sector and new growth, rather than stagnation. The employment component of that survey has returned to growth, alleviating concerns about a potential downturn in the labor market. ADP and JOLTs figures indicate a degree of cooling; however, they do not exhibit weakness sufficient to undermine the strength observed in the services sector. The Dollar Index has established support amid this mix, and investors are now turning their attention to Friday’s Nonfarm Payrolls release, which will either validate the resilience narrative or undermine it. As long as NFP results come in significantly lower than anticipated, the macroeconomic environment supports the USD in comparison to the EUR. The expectations surrounding monetary policy strengthen that inclination. The Federal Reserve’s decision to cut rates in December did not signal the beginning of an aggressive easing cycle. The committee continued to show division, with Chair Powell highlighting the importance of patience and reliance on data. Current market expectations indicate a gradual and measured approach to interest rate cuts, rather than a swift return to previous levels. The elevated US yields compared to the euro area present a clear challenge for EUR/USD. As long as market sentiment holds that the Fed will implement gradual rate cuts while the US economy adjusts to tighter policies, the rate differentials are likely to favor the dollar.
The data narrative from the Eurozone appears to be less favorable. In December, headline inflation decreased to 2.0 percent year-on-year, a decline from 2.6 percent, aligning precisely with the ECB’s target. This alleviates the pressure on the ECB to maintain a hawkish stance, enabling policymakers to adopt a more neutral position. Nevertheless, the growth momentum appears to be lacking. In November, German retail sales experienced a decline of 0.6 percent, indicating a significant shortfall for an economy that was in need of a recovery in consumer demand. Services activity has shown signs of cooling, with the S&P services PMI adjusted to 52.4. While it remains above the 50 mark, it is evidently losing momentum. The interplay of subdued growth signals and inflation meeting targets diminishes the euro’s attractiveness, particularly as the US demonstrates a resurgence in strength. The currency heat map indicates that the euro is not experiencing a widespread collapse. In comparison to the New Zealand dollar, the euro demonstrates strength, indicating a risk-off inclination towards lower-beta assets and specific cross-dynamics. In contrast to the US dollar, the scenario presents a different outlook. The daily fluctuations between EUR and USD may be minimal, yet the overarching trend in EUR/USD continues to decline, influenced by stronger economic indicators from the US and a slowdown in Eurozone growth. The observed divergence clarifies the reason behind the ability of certain EUR crosses to increase, even as the primary pair faces challenges in regaining the 1.1700 level. The narrative surrounding EUR/USD reflects a blend of slight euro weakness alongside consistent support for the dollar.
The present price movement for EUR/USD is centered on a group of significant technical levels. The pair is currently positioned close to 1.1680, having recorded an intraday low of approximately 1.1673 during the Asian trading session. The 50-day EMA at 1.1682 and the 200-period MA on the 4-hour chart at approximately 1.1670 establish a short-term support band. Should the market close firmly beneath this level, bearish traders will target the subsequent static support levels at 1.1659 and subsequently at 1.1622. Subsequently, the monthly low at 1.1589 from December 1 emerges as the primary downside attraction. On the upside, initial resistance is positioned at the 9-day EMA at 1.1711, with subsequent levels at 1.1730–1.1743 near a descending trendline. At elevated levels, 1.1805–1.1808 and 1.1918 represent significant structural barriers. The 4-hour RSI at approximately 40 indicates a sustained downside momentum without reaching oversold levels, aligning with the gradual, consistent trend observed in price movements. The current market positioning in EUR/USD is heavily influenced by the impending data releases. The recent Weekly US Initial Jobless Claims and ISM components have contributed to a slight increase in the dollar, yet the key determinant will be the Nonfarm Payrolls report released on Friday. A robust NFP report coupled with solid wage growth would bolster the narrative of US resilience, potentially driving the pair beneath 1.1680–1.1670 and towards 1.1659 and 1.1622. A notable downside surprise in NFP, particularly if paired with weaker wages, may lead to a depreciation of the dollar, enabling EUR/USD to recover above 1.1710, potentially pushing into the 1.1730–1.1743 resistance area.
In the Eurozone, sentiment indicators and producer-price data may slightly influence ECB expectations, yet the primary factor driving volatility in the short term continues to be US data. Considering all factors, the outlook for EUR/USD continues to be negative below the 1.1710–1.1730 range. The pair is currently positioned below the 9-day and 50-day EMAs, moving within a downward channel. The daily RSI stands at 42.6, while the 4-hour RSI is close to 40. US services at 54.4 demonstrate resilience in labor indicators and gradual-cut pricing, which bolster the dollar. In contrast, German retail sales at minus 0.6 percent, Eurozone inflation at 2.0 percent, and a slowdown in services activity exert pressure on the euro. Provided the pair remains constrained beneath the 1.1710–1.1730 range, upward movements should be viewed as opportunities to sell, aiming for targets at 1.1659, followed by 1.1622, and possibly reaching the 1.1589 low. A sustained break and daily close above approximately 1.1780–1.1808 would negate the existing structure and create a pathway toward 1.1918. Until that occurs, the data and the charts collectively indicate that EUR/USD should be sold on strength, rather than bought.