EUR/USD Market Update

The EUR/USD saw a slight increase on Tuesday, trading at 1.1615, following a drop from a two-week peak of over 1.1650 the day before. The U.S. dollar has bounced back from its recent lows as investors exercise caution while they await the preliminary data on the Eurozone’s Harmonized Consumer Price Index (HICP) and unemployment figures.

The U.S. Dollar Index (DXY), which gauges the dollar against a selection of six major currencies, gained some ground on Monday even with a disappointing U.S. ISM Manufacturing Purchasing Managers Index (PMI). This report indicated that sector activity has contracted for the ninth month, affected by a decline in new orders and jobs amid increasing inflationary pressures.

On Monday, Bank of Japan Governor Kazuo Ueda unsettled markets with hints of a potential interest rate hike in December. This statement led to a global bond market selloff, elevating U.S. Treasury yields and lending some support to the weakening dollar.

While risk appetite is still hesitant, concerns softened somewhat after a successful Japanese government bond auction early Tuesday. The U.S. economic calendar appears light today, with attention shifting toward Wednesday’s ISM Services PMI and ADP employment report.

Key Market Movements

• The U.S. dollar is recovering from Tuesday’s lows, supported by a risk-averse atmosphere amidst a global bond selloff. However, any upward movement seems likely to be constrained as investors anticipate that the Federal Reserve will lower interest rates in December, potentially leading to further cuts in 2026.
• This Tuesday’s economic calendar focuses on Eurozone consumer inflation, measured by HICP, expected to maintain a steady annual rate of 2.1% in November. The core HICP is anticipated to rise to a year-on-year rate of 2.5% from 2.4% in October, yet these figures may not alter the European Central Bank’s (ECB) position on keeping interest rates stable for a while.
• Additionally, Eurozone unemployment rates will be released today, with the market consensus predicting an unchanged rate of 6.3% for October.
• On Monday, the ISM Manufacturing PMI in the U.S. indicated further contraction, with the index dropping to 48.2 from 48.7 in October, well below the expected 48.6. The new orders index also fell to 47.4 from 49.4, while the employment index decreased to 44 from 46 in the previous month. The price index rose from 58.0 to 58.5, underscoring the inflationary impacts of trade tariffs.
• Manufacturing statistics in the Eurozone were also underwhelming, with the final HCOB Manufacturing PMI for November being revised downwards from an initially expected 49.7 to 49.6, marking the lowest level in five months.

Technical Analysis: EUR/USD Approaching Resistance

Although EUR/USD has pulled back from the high of 1.1650, the short-term outlook still leans bullish. Technical indicators are somewhat mixed on the 4-hour chart; the pair is trying to hold above the trendline resistance at 1.1615. The Relative Strength Index (RSI) is holding in bullish territory near 60.0, while the Moving Average Convergence Divergence (MACD) indicator remains close to the signal line, indicating weak momentum.

If it surpasses 1.1615, bulls could target the 1.1660-1.1670 range, recalling the highs seen on October 28, 29, and November 13, 14. Beyond this, the next significant milestone would be the October 17 high, just under 1.1730, though that appears quite far off for Tuesday’s trading.

On the downside, support has been found in the 1.1600-1.1590 range (Monday’s low and intraday low) ahead of the 1.1550 mark, where bearish conditions were noted on November 26 and 28. Should it drop further, the psychological level of 1.1500 and the November 5 low around 1.1470 may come into play.