EUR/USD Market Update

On Friday, EUR/USD saw a slight uptick, trading at 1.1620, bouncing back from a six-week low of 1.1593 that was reached the day before. This rally is likely to help it break a three-week losing streak, buoyed by robust U.S. economic data which suggests that the Federal Reserve might maintain its interest rates for the foreseeable future.

Recently released figures from the U.S. Department of Labor revealed a surprising drop in new jobless claims, which fell to the lowest figure since November. This change has somewhat alleviated worries in the market regarding an ailing labor market.

Moreover, the New York Empire State Manufacturing Index and the Philadelphia Fed Manufacturing Survey both surpassed projections, indicating a strong beginning for the manufacturing sector this year.

Eurozone data on Friday showed that consumer inflation in Germany reached the European Central Bank’s target of 2% year-on-year in December. This will now lead to attention on upcoming industrial production numbers and speeches from Fed Vice Chair Michelle Bowman and Philip Jefferson.

Market Movement Highlights

• The U.S. Dollar Index (DXY) had a slight pullback on Friday but retains a strong bullish trend. Current economic indicators point to a vibrant U.S. economy grappling with high inflation, diminishing investor expectations for quick monetary easing from the Fed.
• Jobless claims in the U.S. for the week ending January 10 dropped to 198,000 from 207,000 the previous week, bucking expectations that they would climb to 215,000.
• The New York Empire State Manufacturing Index rebounded to 7.7 in January, after a drop to 3.7 in December, exceeding expectations for a more modest rise and indicating a significant improvement in business conditions.
• The Philadelphia Fed Manufacturing Index increase to 12.6 in January from -8.8 the month before, also surpassing expectations. New orders and shipments were up, although the employment index dipped, yet overall, the sector saw better conditions compared to last month with prices still above typical averages.
• With this backdrop, assertive comments from Fed officials bolstered the USD. Atlanta Fed President Rafael Bostic and Kansas Fed President Jeffrey Schmidt emphasized the need to maintain restrictive interest rates given ongoing inflationary pressures.
• In Germany, the final harmonized consumer price index confirmed inflation fell to 0.2% in December, down to 2.0% year-over-year from 2.6% in November. Following this news, the euro strengthened from its previous lows.

Technical Analysis: EUR/USD Resistance Levels

EUR/USD appears to be gaining ground from its lows and is aiming to establish a position above the resistance point at 1.1620. The Moving Average Convergence Divergence (MACD) indicates potential upward movement past the signal line, while the Relative Strength Index (RSI) has risen to 40, signaling a decline in bearish momentum.

If it surpasses 1.1621—the low from January 12—the next focus will be on the channel’s upper range near 1.1665. Conversely, immediate support rests around Thursday’s low at 1.1590, with channel support positioned at roughly 1.1585. Further down, a critical target would be the late November low of 1.1560.