EUR/USD declines for a third consecutive session as robust US economic data strengthens the Dollar

EUR/USD Slides for Third Consecutive Session as US Data Lifts Dollar

The EUR/USD currency pair continued its downward trend for a third straight day this week, slipping by approximately 0.10%. The US Dollar gained strength following robust US economic data, including a strong ISM Purchasing Managers Index (PMI) and encouraging employment figures. Meanwhile, inflation in the Eurozone eased, hovering near the European Central Bank’s target, which put additional pressure on the Euro. As a result, the pair is trading at 1.1677 and looks set to close below the 1.1700 mark.

US Economic Strength Overshadows Weak Eurozone Indicators

The US Dollar found support after the ISM Services PMI for December surpassed forecasts, signaling a pickup in activity within the American services sector. Although the Department of Labor reported a drop in job openings, earlier data revealed that private sector hiring improved in December compared to November.

In the Eurozone, the Harmonized Index of Consumer Prices (HICP) matched the ECB’s 2% annual target, but core inflation remained somewhat elevated. Additionally, lackluster German retail sales for November weighed further on the Euro, which dropped to a two-day low of 1.1672.

The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, climbed 0.14% to 98.73, creating a headwind for EUR/USD.

Market Focus: Upcoming Economic Releases

Investors are now turning their attention to upcoming economic reports. In Europe, key releases include Eurozone Consumer Confidence, Business Climate, Economic Sentiment, and the Producer Price Index. In the United States, the focus will be on December’s Challenger Job Cuts and the latest Initial Jobless Claims for the week ending January 3.

Key Market Drivers: Strong US Services Data Pressures Euro

• The Institute for Supply Management reported a notable jump in the ISM Services PMI for December, rising from 52.6 to 54.4 and exceeding expectations of 52.3. The Employment component returned to growth, moving up from 48.9 to 52.0, which is a positive sign for Federal Reserve policymakers. Meanwhile, Prices Paid eased slightly from 65.4 to 64.3, suggesting some relief in cost pressures despite ongoing demand.
• The US Department of Labor’s JOLTS report for November showed job openings fell to 7.146 million from 7.449 million in October, indicating a gradual slowdown in labor market demand.
• The ADP Employment Change report revealed private sector payrolls increased by 41,000 in December. While this was below the forecast of 47,000, it marked an improvement from November’s loss of 29,000 jobs, hinting at a tentative recovery in hiring at year-end.
• In the Eurozone, annual HICP inflation reached 2% in December, aligning with expectations and slowing from November’s 2.1%. On a monthly basis, inflation rose by 0.2% after a 0.3% decline the previous month.

Technical Analysis: EUR/USD Breaks Below 1.1700 as Bearish Momentum Builds

From a technical perspective, EUR/USD extended its decline, finishing Wednesday’s session under the 1.1700 threshold. The Relative Strength Index (RSI) dropped below the neutral 50 level, signaling that sellers have gained the upper hand.

Looking at support levels, the first significant floor is the 100-day Simple Moving Average (SMA) at 1.1663. Further support lies at the 50-day SMA at 1.1640 and the 200-day SMA at 1.1561.

For any bullish reversal, buyers would need to push the pair above the 20-day SMA at 1.1733, with the next resistance at 1.1750. Clearing these levels could open the way toward 1.1800.

EUR/USD Daily Chart