EUR/USD Outlook: Minor Decline Amid Mixed Eurozone Data

As of now, the EUR/USD has slipped from a session peak of 1.1764, primarily due to disappointing preliminary Purchasing Managers’ Index (PMI) figures for the Eurozone and significant economies. Currently, it’s trading at about 1.1750, showing little change on the daily chart.

The Eurozone’s services sector activity dipped to 52.6 according to the PMI, which is below November’s figure of 53.6 and didn’t meet expectations for a rise to 53.9. Likewise, manufacturing activity saw a sharper decline, dropping from 49.6 in November to 49.2, while analysts had anticipated a minor improvement to 49.2.

Germany experienced similar trends, with the manufacturing PMI falling from 48.2 to 47.7 and services activity easing from 53.1 to 52.6. In France, the services PMI dropped to 50.2 from 51.4, although manufacturing saw an unexpected uptick, rising to 50.6 from November’s 47.8.

In the United States, attention is shifting toward the upcoming non-farm employment figures for October and November. These stats are anticipated to shed light on the U.S. labor market’s current state, though a complete picture won’t emerge due to missing data from the recent government shutdown.

Market Influencing Factors: US Dollar’s Weak Position Pre-Employment Data

• The euro remains buoyed near recent highs as investors speculate on further rate cuts from the Federal Reserve. The European Central Bank (ECB) is widely expected to maintain interest rates during its upcoming board meeting, hinting at potential hikes in late 2026.
• Recent U.S. statistics did not favor the dollar. For instance, the New York Empire State Manufacturing Business Index plummeted to -3.9 in December, starkly lower than the expected 10.6 and November’s reading of 18.7.
• In contrast, Eurozone industrial production data surpassed expectations, climbing by 0.8% in October compared to a mere 0.2% in September, while analysts had only forecast a 0.1% rise. Year-on-year, industrial production jumped by 2%, up from a 1.2% increase in September.
• Amid ongoing peace negotiations in Ukraine, President Trump and President Zelensky’s recent meeting in Berlin led to the U.S. providing NATO-style security to Ukraine, which has offered some support to the euro.
• Recent nonfarm payroll data indicates a net increase of 40,000 jobs for November. The unemployment rate is expected to hold steady at 4.4%, although salary data for October is due soon, but the unemployment statistic will be incomplete due to data gaps.
• Additionally, the U.S. Department of Commerce is set to release retail sales numbers for October, projected to increase by 0.2%, aligning with September’s rate. Retail consumption, excluding automotive sales, is also expected to rise by 0.2%, slightly below September’s 0.3% increase.

Technical Analysis: Signs of Exhaustion in EUR/USD Appreciation

The EUR/USD continues in its bullish trend. However, Monday’s rally has not confirmed above last week’s high of 1.1763, as technical indicators suggest waning momentum. The 4-hour Relative Strength Index (RSI) displays a bearish divergence while still remaining in bullish territory. Furthermore, the Moving Average Convergence Divergence (MACD) recently fell below its signal line, hinting at possible deeper corrections ahead.

Immediate support can be observed near the low of December 12 at 1.1720. Should that falter, further bearish targets are set at the December 11 low around 1.1685 and the December 9 low near 1.1615. On a positive note, the 1.1760-1.1770 zone, previously the upper limit of the bullish market on December 11 and 15, leads up to the October peak around 1.1780. The pair faces a significant resistance level here that must be cleared to redirect focus toward the highs of September 23 and 24, approximately at 1.1820.

Economic Indicators: Key Releases

HCOB Manufacturing PMI

The Manufacturing Purchasing Managers Index (PMI), produced by Hamburg Commercial Bank, is a key indicator of economic activity in the Eurozone’s manufacturing sector. It is derived from a survey of high-ranking executives in private manufacturing companies. A reading of 50.0 indicates no change, while any number above signifies growth and is generally seen as positive for the euro.

HCOB Service PMI

The Services Purchasing Managers Index (PMI) from Hamburg Commercial Bank measures business activity within the services sector of the Eurozone. It’s significant because this sector accounts for a large part of the economy. Like the manufacturing PMI, any reading above 50 hints at expansion, which is usually bullish for the euro.