EUR/USD remains down after robust US data and the US-India agreement

The euro (EUR) has given back earlier gains against the US dollar (USD) on Tuesday, dipping below the 1.1800 mark to trade at around 1.1780. This change followed robust US manufacturing data and news of a trade agreement between the US and India, which bolstered the USD on Monday, easing fears surrounding a possible US government shutdown.

In a notable development, US President Donald Trump revealed an agreement with India aimed at slashing tariffs on Indian imports from 50% down to 18%. Additionally, Iranian President Masoud Pezeshkian stated that Iran would commence nuclear discussions with the US, helping to diminish regional tensions and providing further support for the USD.

On the macroeconomic front, the US ISM Manufacturing Purchasing Managers’ Index (PMI) released on Monday exceeded expectations, coming in at 52.6, a notable increase from December’s 47.9. This alleviated worries that the partial government shutdown would postpone Friday’s nonfarm payrolls report.

Looking ahead, the economic calendar for Tuesday will feature speeches from Richmond Federal Reserve President Thomas Barkin and other Fed officials. Yet, it’s likely that investors will adopt a “wait-and-see” approach ahead of Wednesday’s US ADP employment report, which is expected to command significant attention, as well as the European Central Bank’s (ECB) monetary policy decision set for Thursday.

Daily Insight into Market Movements: Dollar Gains Further Amid Positive US Data

• Enhancing the US dollar’s position, factory data from Monday indicated that the US ISM manufacturing PMI for January reached a three-year high of 52.6, surpassing the forecast of 48.5.
• Along similar lines, the US S&P World Manufacturing PMI for January was revised upward to 52.4 from an initial estimate of 51.9.
• Furthermore, President Trump’s trade deal with China was announced on Monday, wherein China commits to purchasing US oil, defense goods, and aircraft in exchange for reduced tariffs and greater access to its agricultural market for US products.
• Investors largely overlooked the ongoing partial government shutdown, as a Senate bill to reopen affected federal agencies heads to the House for a vote on Tuesday. This week’s labor reports, including the JOLTS job openings and non-farm payrolls, are anticipated later.

Technical Analysis: EUR/USD Shows Weakness, with Key Support at 1.1770

The EUR/USD pair is currently hovering near recent lows after experiencing a 2.5% reversal from last week’s lows. The immediate sentiment remains bearish, with the Relative Strength Index (RSI) on the 4-hour chart indicating a status below 40, pointing to ongoing bearish momentum. The Moving Average Convergence Divergence (MACD) histogram reflects a tapering red bar, which suggests that selling pressure is starting to lessen.

The pair appears to have found some stability, although bulls will likely try to challenge Monday’s high of 1.1875. A further target for them might be the January 30 high around 1.1975, just above the 1.2000 threshold.

Conversely, on the downside, the focus for bearish traders remains around the 1.1770 level, indicated by the January 20 high. If the pair dips below this level, pressure could increase toward the January 21 and 22 lows near 1.1665.

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