EUR/USD approaches recent highs with support before US PMI data is released.

The EUR/USD exchange rate has seen a slight drop, currently hovering just above 1.1730 on Friday. Still, it has managed to hold on to much of yesterday’s gains and is headed for its best weekly result since June. However, the preliminary Purchasing Managers’ Index (PMI) figures from the Eurozone didn’t offer much boost to the euro, which remains close to multi-week peaks, buoyed by a softer euro as attention turns to the U.S. S&P global PMI.

Meanwhile, U.S. President Donald Trump’s fixation on Greenland and the tense state of U.S.-European relations have generated significant headlines this week, causing the dollar to decline broadly. Trump mentioned on social media that a NATO agreement has granted full and permanent access to the Arctic island, following his earlier decision to back off military actions against NATO allies during a speech at the Davos World Economic Forum, and retreating from threats of tariffs on eurozone nations.

From a macroeconomic perspective, Thursday’s data showed that third-quarter GDP in the U.S. surpassed expectations, while new weekly jobless claims rose less than analysts predicted. Moreover, the personal consumption expenditures (PCE) price index indicated growing inflation pressures in November. These developments bolster the Federal Reserve’s stance on stable interest rates, but the dollar remains weak.

Daily Digest Market Movers: EU-US tensions impact USD

• The worsening relationship between the U.S. and the EU, partly due to the Greenland situation, has eroded the U.S.’s credibility as a world leader and the dollar’s status as a primary currency, with the dollar index (DXY) languishing near a three-week low.
• Trump’s somewhat softer position towards the EU has lifted the market mood somewhat, leading to a reassuring rebound. Yet, the damage to transatlantic relations is significant, with the dollar feeling the impact for now.
• Preliminary PMI figures from the Eurozone indicated that the services sector growth held steady at 51.6, unchanged from December, in line with market expectations. Manufacturing PMI improved to 49.4 from December’s 48.8, but it’s still in a contraction range under 50.
• Germany’s PMI data released early Friday was encouraging, with services rising to 53.3 from 52.7 the previous month, surpassing mild market predictions. Manufacturing PMI also improved from 47.0 to 48.7, exceeding the expected 48.0, although still indicating contraction.
• Thursday’s macroeconomic indicators in the U.S. were supportive of the dollar. The third-quarter GDP was revised up to 4.4% annualized, compared to a previous estimate of 4.3%, and also outpacing the second-quarter growth of 3.8%.
• As anticipated, the U.S. PCE price index climbed to 2.8% year-on-year in November from 2.7% previously, with the core PCE showing a similar trend.
• For the week of January 17, the number of new unemployment claims in the U.S. edged up to 200,000 from a previous revision of 199,000, although it remains significantly lower than the anticipated 212,000.
• The upcoming preliminary S&P Global Services PMI is expected to show an increase from December’s 52.5 to 52.8 in January.

Technical analysis: EUR/USD remains capped below resistance in the 1.1765 area

The EUR/USD pair is currently trapped between Fibonacci retracement levels of 61.8% and 72.6%, suggesting that its bullish structure remains intact for the moment.

Some technical indicators reflect a moderate positive trend. The Relative Strength Index (RSI) remains stable above 60, while the Moving Average Convergence Divergence (MACD) histogram is contracting yet still positive, indicating a moderate bullish momentum overall.

On the downside, the intraday low is around 1.1725, but there’s no evident support until Thursday’s low at 1.1670. If prices breach the resistance at 1.1765 (which was seen earlier on January 2nd and 20th), the next target would be the December 24th high of 1.1808.

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