EUR/USD had a rough week, dropping 0.20% on Friday, and looking at a 0.70% weekly loss despite some varied economic reports from the U.S. While retail sales figures in the EU exceeded expectations, traders are clearly fixated on U.S. developments and the dollar. Currently, the pair is at 1.1636 after hitting a high of 1.1662 during the day.
Euro struggles amid U.S. economic signals as focus shifts to dollar dynamics
The U.S. non-farm payrolls data for December presented a mixed picture, with payrolls rising by only 50,000—less than the anticipated 60,000 increase and below November’s 64,000. The unemployment rate, however, dipped slightly from 4.6% to 4.4%, according to the U.S. Bureau of Labor Statistics (BLS).
On another note, the housing sector appears to be losing steam, as both building permits and housing starts fell in October compared to November. In contrast, the University of Michigan’s Consumer Sentiment Report for January surprised on the upside.
In the euro area, consumer spending rose by 0.2% month-on-month in November, a step up from October’s stagnant figures and above expectations. German economic indicators were mixed, with industrial production exceeding forecasts, even though the trade balance weakened due to a drop in exports.
Looking ahead: A packed agenda in Europe and the U.S.
Next week’s Eurozone Economic Document will showcase speeches from European Central Bank policymakers, along with the Centix Investor Confidence Index and the Harmonized Index of Consumer Prices (HICP) for various countries including the Eurozone, Germany, Spain, and Italy.
Meanwhile, the U.S. will release consumer and producer price indexes, retail sales data, and unemployment claims, along with statements from Federal Reserve officials.
Market summary: Euro pulls down U.S. dollar strength
- Besides the jobs report, U.S. building permits declined by 0.2% in October, dropping from 1.415 million to 1.412 million. Housing starts also weakened, down 4.6% from the previous month to 1,246,000, compared to 1,306,000 in September.
- The University of Michigan Consumer Confidence Report for January showed a rise to 54, improving from November’s 52.9 and exceeding forecasts of 53.5. American Airlines’ one-year inflation expectations held steady at 4.2%, while the five-year outlook edged up from 3.2% to 3.4%.
- The CME FedWatch tool indicates that the markets continue to anticipate 50 basis points of easing by year’s end.
- Atlanta Fed President Rafael Bostic described job growth as “moderate,” and noted that inflation “will take longer to address” due to prior reporting gaps from last fall.
- Richmond Fed’s Thomas Barkin pointed out that while the job market has stabilized, employment still appears tightly constrained. He suggested it might take until April for inflation stats to align.
Technical Analysis: EUR/USD drops under continuous selling pressure, falls below 1.1650
Examining the technical landscape, EUR/USD has picked up bearish momentum, showing a neutral to downside bias and breaking significant support levels like the 100-day and 50-day simple moving averages (SMA) at 1.1663 and 1.1641, respectively.
The Relative Strength Index (RSI) indicates that bearish participants are gaining momentum and nearing oversold levels after hitting the 38 mark, signaling a downward path.
The first support for EUR/USD stands at 1.1600. A move below that line could open the door to the 200-day SMA at 1.1565, which might represent the last stronghold for bulls before a potential bearish trend kicks in. Further down the line, you’re looking at 1.1500 and the low from August 1 at 1.1391.
Conversely, if buyers manage to reclaim the 50-day and 100-day SMAs, the next resistance could be at 1.1700. Clearing that level might shift trader focus to the 20-day SMA at 1.1730.
