CFD Trading Rate Euro vs US Dollar (EURUSD)

• EUR/USD could mark further losses due to a dovish sentiment surrounding the ECB.
• Market participants bet on a first 50 bps rate cut from the ECB by June.
• US Treasury Secretary Janet Yellen emphasized that the recent GDP report does not put any threats on a 'soft landing' scenario for the US economy.

EUR/USD holds its position near 1.0850 during the Asian hours on Friday following a backslide in the previous session, which could be attributed to the European Central Bank’s (ECB) interest rate decision. Additionally, the better-than-expected US Gross Domestic Product (GDP) data helped the US Dollar (USD) to mark profits on Thursday, which in turn, acts as a headwind for the EUR/USD pair.

The European Central Bank (ECB) maintained its interest rates for a third consecutive meeting. ECB President Christine Lagarde indicated the possibility of a rate cut in the summer in the monetary policy statement. Market participants anticipate a first 50 basis point cut from the ECB by June. Rate swaps are currently pricing in a total of 140 basis points in rate cuts from the ECB by the end of 2024.

The US Dollar Index (DXY) could seek to build on recent gains, fueled by the stronger-than-expected US Gross Domestic Product (GDP) figures. The Q4 GDP report printed a reading of 3.3%, surpassing the previous figure of 4.9% and exceeding the market consensus of 2.0%.

US Treasury Secretary Janet Louise Yellen has expressed that the strong Q4 GDP data is a result of vigorous and healthy spending, coupled with improvements in productivity. She emphasizes that the GDP report does not indicate any threats to the potential of a 'soft landing' scenario for the US economy. Furthermore, on Friday, the Personal Consumption Expenditures (PCE) Price Index data is expected to provide insights into the monthly changes in both Personal Spending and Personal Income, influencing market sentiment further.

• EUR/USD dropped back into familiar lows after dovish ECB.
• US PCE inflation snapshot due on Friday.
• Euro on pace to be the worst performer of the major currencies this week.

EUR/USD tumbled back into the low side of 1.0850 as the pair resumes cycling within familiar levels on the week, with bearish flows forcing the Euro (EUR) further down against the US Dollar (USD) after the European Central Bank (ECB) held rates steady and US Gross Domestic Product (GDP) figures grew faster than expected in the fourth quarter.

The ECB held rates steady for a third consecutive meeting, but a dovish tilt to ECB President Christine Lagarde’s monetary policy statement ramped up market bets of faster, deeper cuts from the ECB heading into the middle of the year.

ECB Press Conference: Lagarde explains decision to keep rates steady, speaks on policy outlook

Money markets are now betting that a first 50 basis point cut from the ECB will come by June, with rate swaps pricing in 140 bps in total rate cuts from the ECB by the end of 2024 compared to 130 bps before the ECB rate call.

US GDP grew by 3.3% for the year ended in the fourth quarter, beating the median market forecast of 2.0% despite slipping back from the previous period’s 4.9%. US stocks rallied and the US Dollar Index climbed on reaction.

The trading week will wrap up with US Personal Consumption Expenditures (PCE) Price Index figures during the US market session. As the Federal Reserve’s (Fed) preferred method of tracking inflation, markets will be watching the PCE inflation snapshot carefully on Friday. US MoM PCE inflation is forecast to print at 0.2% in December versus the previous month’s 0.1%, and the annualized PCE inflation print is expected to tick down to 3.0% from 3.2%.

EUR/USD Technical Outlook

EUR/USD saw another rejection from the 200-hour Simple Moving Average (SMA) dropping into 1.0880, and intraday price action found a near-term bottom just above 1.0820 before settling Thursday close to the 1.0850 level.

The EUR/USD remains trapped in a congestion zone between the 50-day and 200-day SMAs at 1.0925 and 1.0850 respectively, trapped in a consolidation pattern as near-term price action drifts into the midrange.

EUR/USD Hourly Chart

EUR/USD Daily Chart

• EUR/USD dips 0.19%, in response to the ECB's decision to hold rates and cautious remarks from President Christine Lagarde.
• The US economy outperforms expectations with a 3.3% QoQ GDP growth in Q4 2023, surpassing forecasts but lower than the previous quarter.
• Key upcoming events include further comments from ECB President Lagarde and the release of the Eurozone's Consumer Confidence and US Core PCE Price Index data.

The EUR/USD extends its losses past the European Central Bank (ECB) monetary policy decision to keep the main deposit rate unchanged as the ECB’s President Christine Lagarde's press conference finished. That and solid US GDP figures kept the major down by 0.19%, trading at 1.0864 after hitting a high of 1.0901.

Lagarde’s comments and US economic data weighed on the Euro as the pair edges lower

Summarizing ECB’s President Christine Lagarde's comments at the press conference, she said that inflation is expected to ease further over 2024 while mentioning that growth risks are tilted to the downside. Lagarde added that inflation could fall more quickly if energy prices evolve, though geopolitical tensions in the Middle East pose upside risks to inflation. When asked about rate cuts, she added that the Governing Council agreed they need to be data-dependent

Across the pond, a busy docket in the US revealed the economy for the last quarter of 2023 rose by 3.3% QoQ, exceeding forecasts of 2% and lower than Q3’s 4.9%, according to the Gross Domestic Product (GDP) report revealed by the US Bureau of Economic Analysis (BEA). At the same time, Durable Goods Orders in December were unchanged, blamed on a slump in transportation equipment manufacturing.

On another date, the US Bureau of Labor Statistics revealed that Initial Jobless Claims for the week ending on January 20 increased by 214K, exceeding the previous week's reading and forecasts of 200K.

Ahead on the week. ECB’s President Lagarde will cross wires at around 16:15 GMT today. The Eurozone’s (EU) docket will feature Germany’s Gfk Consumer Confidence on Friday. On the US front, the Federal Reserve’s preferred gauge for inflation, the Core Personal Consumption Expenditure (PCE) Price Index, is expected to drop from 3.2% to 3% YoY. In comparison, general PCE is foreseen at 2.6%, unchanged from the last report.

EURUSD Key Technical Levels

• EUR/USD falls as ECB maintains Main Refinancing Operations Rate unchanged at 4.50% straight for third time.
• ECB Lagarde is seen reiterating the timing for first rate-cut in late Summer.
• Volatility may explode after the release of the US Q4 GDP data.

The EUR/USD pair faces a sell-off as the European Central Bank (ECB) has kept the Main Refinancing Operations Rate unchanged at 4.50% in its first policy meeting of 2024. The ECB was widely anticipated to maintain status-quo for the third time in a row. The central bank has kept the Rate on Deposit Facility at 4% as expected.

As the interest rate policy is largely in-line with market expectations, guidance on interest rate cuts will be keenly watched. ECB President Christine Lagarde is expected to reiterate the timing for first rate cut in the late Summer.

S&P500 futures have generated nominal gains in the European session, indicating a risk-on mood. Steep volatility could emerge after the release of the crucial United States data. The US Dollar Index (DXY) hovers near 103.30 while 10-year US Treasury yields have dropped to near 4.16%.

Meanwhile, investors await the US Q4 Gross Domestic Product (GDP) data, which will provide fresh guidance over the interest rate outlook. Investors have projected that the US economy grew at a slower pace of 2.0% after expanding at a robust pace of 4.9% in the July-September quarter of 2024. This would accelerate hopes of an interest rate cut by the Federal Reserve (Fed) in the first half of 2024.

Going forward, market participants will wait for the core Personal Consumption Expenditure (PCE) price index data for December. A stubborn core PCE inflation report would allow Fed policymakers to continue to lean towards restrictive interest rate stance.

Economists at Scotiabank analyze EUR/USD outlook ahead of the ECB policy decision.

Gains are likely limited to the mid-1.0900s

• EUR/USD juggles near 1.0888 ahead of ECB interest rate policy.
• The USD Index consolidates neat 103.30 ahead of the US GDP data.
• A slowdown in the US Q4 GDP would ease the inflation outlook.

The EUR/USD pair trades lacklustre slightly below the round-level resistance of 1.0900 in the London session. The major currency pair is expected to remain on the tenterhooks ahead of multiple economic indicators.

S&P500 futures have posted some gains in the European session, portraying some recovery in the risk-appetite of the market participants. 10-year US Treasury yields The US Dollar Index (DXY) struck in a tight range around 103.30 as investors await the United States Q4 Gross Domestic Product (GDP) data, which will be published at 13:30 GMT.

Investors have anticipated that the US economy expanded by 2.0%, slower than growth rate of 4.9% in the third quarter of 2023. This would be the lowest growth rate since 2Q2022. A slowdown in the growth rate would ease consumer inflation expectations and boost hopes of an interest rate-cut by the Federal Reserve (Fed) in March.

In addition to the US GDP data, market participants will focus on the core Personal Consumption Expenditure (PCE) price index data for December, which will be released on Friday.

On the Eurozone front, investors await the interest rate decision from the European Central Bank (ECB), which will be announced at 13:15 GMT. The ECB is expected to maintain the main refinancing operations rate unchanged at 4.5%. Last week, ECB President Christine Lagarde commented that the central bank could start reducing interest rates from late Summer. Lagarde warned that inflation is high from where the ECB wants.

The European Central Bank (ECB) announces its rate decision today. Economists at ING analyze how the policy announcement could impact the EUR/USD pair.

Outside risk to 1.0980/1.0990 should ECB pushback against easing expectations prove surprisingly effective

Economists at TD Securities discuss the European Central Bank (ECB) Interest Rate Decision and their implications for the EUR/USD pair.

Base Case (65%)

Hawkish (30%)

Dovish (5%)

• EUR/USD loses ground as the US Dollar attempts to recover its recent losses.
• The lagging indicator MACD suggests a confirmation of the bearish momentum.
• The 38.2% Fibonacci retracement at 1.0867 and major support at 1.0850 could act as the immediate support zone.

EUR/USD trades lower near 1.0880 during the Asian session on Thursday as the US Dollar (USD) makes efforts to retrace its recent losses. The 14-day Relative Strength Index (RSI) for the EUR/USD pair is positioned below the 50 mark, indicating a bearish momentum in the market.

The lagging indicator Moving Average Convergence Divergence (MACD) for the EUR/USD pair indicates a potential confirmation of a downward trend. The MACD line is positioned below the centerline and is diverging below the signal line. This configuration suggests that the short-term moving average is lagging behind the long-term moving average, signaling a potential bearish momentum in the EUR/USD pair.

The 38.2% Fibonacci retracement at the 1.0867 level appears as the immediate support for the EUR/USD pair followed by the major support at the 1.0850 level. A collapse below the major support could lead the pair to navigate the area around psychological support at 1.0800 followed by the 50% retracement level at 1.0787.

On the upside, the psychological level at 1.0900 serves as an immediate barrier, with a major level at 1.0950 further complicating the path. A successful breakthrough above the major barrier could potentially inspire bullish momentum in the pair. If this occurs, the bulls may target the region around the psychological level at 1.1000, and beyond that, they could aim for January's high at 1.1038.

EUR/USD: Daily Chart

• Euro rose on upbeat EU PMIs, fell after US PMIs beat expectations.
• ECB rate call due during Thursday market session, Friday to wrap up with US PCE inflation.
• EUR/USD gets hampered by 200-hour SMA.

EUR/USD rose to a near-term high above 1.0930 on Wednesday after European Purchasing Managers’ Index (PMI) figures surprised to the upside on the manufacturing component, while a broad forecast beat for US PMI data soured market sentiment and sent the EUR/USD lower as investors second-guessed the day’s momentum and pulled back into the safe-haven US Dollar (USD), albeit slightly.

HCOB PMIs for the pan-European economy mixed on Wednesday as investors chose to focus on the PMI Manufacturing component which rose to 46.6 in January, above the forecast increase to 44.8 from December’s 44.4. The Services component of the PMI declined to 48.4 from the previous 48.8, entirely missing the forecast uptick into 49.0.

US: Flash PMIs surprise to the upside in January

The Euro (EUR) rallied against the USD after investors took upbeat manufacturing figures to heart despite the PMI still printing in contractionary territory below the 50.0 level, a barrier the EU Manufacturing PMI has not printed above in almost two years.

The US S&P Global PMIs broadly came in above expectations as the US economy continues to outperform forecast models. January’s Manufacturing PMI climbed to an 11-month high of 50.3, returning to growth territory above 50.0 for the second time in four months and easily clearing the forecast steady print at 47.9 in December.

The US Services PMI component also climbed above expectations, printing at 52.9 versus the forecast backslide from 51.4 to 51.0. With US PMIs cleanly beating the street, investors are getting knocked back once again from rate cut hopes as a firming US economy makes the Federal Reserve (Fed) less likely to panic and begin cutting rates earlier than expected. Market-wide bets of a March rate cut from the Fed are now below 40% according to the CME’s FedWatch tool, down from around 80% just a month ago.

ECB Preview: Forecasts from 12 major banks

Thursday brings another rate call and monetary policy statement from the European Central Bank (ECB), and markets will be keeping a close eye on the extend of the ECB’s hawkish or dovish stance after ECB policymarkers worked double duty in recent days to talk down market hopes for an early rate cut before the summer months.

The trading week will cap things off with another print of the US’ Personal Consumption Expenditure (PCE) Price Index on Friday, which is expected to tick upwards MoM in December from 0.1% to 0.2%, and the annualized figure is seen ticking down from 0.1% to 0.2%.

EUR/USD Technical Outlook

The EUR/USD saw a sharp rejection after climbing through the 200-hour Simple Moving Average (SMA) near 1.0895, peaking at a near-term intraday high above 1.0930 before getting forced back down and settling Wednesday near the familiar 1.0880 level.

The EUR/USD is trading into a heavy congestion zone between the 50-day and 200-day SMAs near 1.0925 and 1.0850 respectively, and the pair is set to continue grinding out near-term consolidation between the two key technical barriers.

EUR/USD Hourly Chart

EUR/USD Daily Chart

• EUR/USD knocks back after a firm rally as safe-haven bids step up.
• US PMI beats take center stage as rate cut hopes wither further.
• A beat for the EU Manufacturing PMI helped kick off a EUR/USD climb.

The EUR/USD drove back into the high side near 1.0930 on Wednesday after markets shrugged off a miss for pan-European Purchasing Managers Index (PMI) figures before a follow-up beat in US PMIs sent risk appetite skidding back into the safe havens. The pair gained over a full percent bottom-to-top climbing from the previous day’s low of 1.0821 before getting pushed back into a familiar technical level near 1.0900.

European PMIs broadly printed in the sub-50.0 region, suggesting the broader euro area economy remains in contraction territory, and nearly all missed market expectations with the exception of a single bright spot in the manufacturing sector. Meanwhile, US PMIs broadly beat the Street, with a climb to multi-month highs in both manufactured goods and the service sector.

Daily digest market movers: EUR/USD rally gets cut short after US PMIs tarnish rate outlook once more

• European PMIs broadly missed expectations, but a beat in the Manufacturing PMI helped bolster the mood as investors search for a Euro win.
• The pan-European Manufacturing PMI printed at 46.6 in January, above the forecasted 44.8 and climbing even higher above the previous month’s 44.4.
• The Europe-wide PMI Services component fell to 48.4, missing the forecast of 49.0 and slipping back further from December’s 48.8.
• European Manufacturing PMIs climbed to a ten-month high, extending a recovery from multi-year lows and bolstering the Euro (EUR).
• US PMIs broadly beat market expectations to print healthy gains in business activity, crumpling rate cut hopes even further and sending traders back into the US Dollar in the mid-week market session.
• January’s US Manufacturing PMI climbed to a 15-month high of 50.3, returning to expansion territory above 50.0 and easily beating the market forecast of a steady print at December’s 47.9.
• The US Services PMI for January also jumped forecasts to print at 52.9 versus the forecasted decline from 51.4 to 51.0.
• EUR-based pairs will be turning to face Thursday’s European Central Bank (ECB) rate call.
• Markets are broadly looking for rate cuts from the ECB to begin sometime around the midpoint of 2024.
• ECB Preview: Forecasts from 12 major banks

Technical Outlook: EUR/USD continues to splash around in tight congestion zone

EUR/USD finds itself getting dumped back into the 1.0900 handle near the 200-hour Simple Moving Average (SMA) on Wednesday as the pair struggles to find real momentum, keeping the pair pinned to near-term technical levels amidst a broader push into mid-term consolidation. A widening consolidation range is highlighting the increased volatility in the EUR/USD despite keeping the pair close to long-term support near 1.0850.

Daily candlesticks have the EUR/USD stuck in the middle of a consolidation pattern between the 50-day and 200-day SMAs at 1.0920 and 1.0850, respectively. The Euro-Dollar pair is set to drift until a meaningful push develops in either direction.

EUR/USD Hourly Chart

EUR/USD Daily Chart

• EUR/USD gains momentum, , fueled by falling US Treasury yields and significant options expiry, despite mixed business activity in the EU.
• EU business activity remains in contraction, with the HCOB Composite PMI slightly improving but still in recessionary territory, reflecting challenges in demand and rising prices.
• US business activity surprisingly expanded, portraying a solid economy, a headwind for EUR/USD.

The EUR/USD resumed its uptrend on Wednesday amid the lack of a catalyst. Even though business activity improved in the Eurozone (EU), it is not the main reason behind the major’s advance. Falling US Treasury yields and a large option expiring on Thursday at 10:00 AM ET of 2.1 billion Euros linked to the major at around 1.0900 sponsored an uptick toward a daily high of 1.0932. At the time of writing, the EUR/USD trades at 1.0900, up 0.43%.

Divergence in business activity between the US and the EU, favors EUR/USD’s downside

Data-wise, business activity in the EU remained in contractionary territory as the HCOB Composite PMI, which encompasses the Services and Manufacturing PMIs, rose by 47.9 in January from December’s 47.6. However, it remained in recessionary territory for the eighth straight month. The report revealed that demand is falling, while prices rose courtesy of tensions in the Red Sea.

Across the pond, at around 14:45 GMT, S&P Global revealed that business activity in the US economy is picking up while prices abated. The US Flash Composite PMI rose to 52.3 its highest since June 2023, while the Services PMI expanded by 52.9 from 51.4. Meanwhile, manufacturing activity was the largest contributor to the composite index, which rebounded from 47.9 to 50.4, crushing estimates of 47.9.

S&P Global Chief Business Economist Chris Williamson said, “With the survey indicating that supply delays have intensified while labor markets remain tight, cost pressures will need to be monitored closely in the coming months, but for now, the survey sends a clear and welcome message of resilient economic growth and sharply waning inflation.”

The latest US Flash PMI report and last week’s data suggest the US economy remains solid and could deter the Federal Reserve (Fed) from easing policy, as the risks for inflation remain tilted to the upside. Next in the US economic docket are the Gross Domestic Product (GDP) report release, the Core Personal Consumption Expenditures (PCE) Price Index, Durable Goods Orders, and the unemployment claims.

On the Eurozone, the European Central Bank (ECB) monetary policy decision is awaited, followed by ECB’s President Christine Lagarde's press conference.

EUR/USD Price Analysis: Technical outlook

The EUR/USD dipped and formed a ‘bearish engulfing’ chart pattern, which is being invalidated by a leg-up that has breached the 50-day moving average at 1.0922 and tests the 61.8% Fibonacci retracement at 1.0931. A daily close above those two levels would expose the January 16 high at 1.0951, followed by the January 11 cycle high at 1.0999.

On the other hand, if prices tumble toward the 1.0900 figure, dropping beneath that, bears would regain control and could drag the pair below the 200-DMA at 1.0844, followed by a January 23 low of 1.0821 ahead of the 1.0800 figure.

EUR/USD retests the 1.0900 mark. Economists at Scotiabank analyze the pair’s outlook.

Trend strength signals are still leaning EUR-bearish

• EUR/USD snaps its recent losses after the improved Manufacturing PMI data.
• Eurozone Manufacturing PMI improved to 46.6 from the previous reading of 44.4.
• German Manufacturing PMI reached 45.4 in January from 43.3 prior.
• US Dollar declines as US yields face a challenge on expectations of the Fed to initiate rate cuts from May.

EUR/USD gains ground after the mixed Purchasing Managers Index (PMI) data for the Eurozone and Germany. The EUR/USD pair edges higher to near 1.0880 during the European session on Wednesday. Additionally, the subdued US Treasury yields are contributing to downward pressure for the US Dollar (USD), which in turn, underpins the EUR/USD pair.

In January, the preliminary Eurozone HCOB Services Purchasing Managers' Index (PMI) decreased to 48.4, falling short of the anticipated reading of 49.0. The Manufacturing PMI showed improvement, improving to 46.6 from the previous reading of 44.4. In Germany, the Services PMI declined to 47.6, below the market consensus of 49.5. While the Manufacturing PMI in Germany improved, reaching 45.4 compared to the prior reading of 43.3.

These figures indicate a mixed picture for economic activities in the Eurozone, with the services sector experiencing a decline while manufacturing shows signs of improvement ahead of the European Central Bank’s (ECB) monetary policy statement on Thursday.

The US Dollar Index (DXY) experiences a decline, nearing the 103.20 level, as the 2-year and 10-year yields on US bond coupons stand at 4.31% and 4.09%, respectively, at the time of writing. This movement in the bond market could be suggestive of market expectations that the Federal Reserve (Fed) may initiate rate cuts, with full pricing in of a 25 basis point (bps) cut in interest rates for May.

Adding to this, former St. Louis Fed President James Bullard has put forth a perspective suggesting the possibility of the Fed implementing interest rate cuts even before inflation reaches the 2.0% threshold. Bullard speculates that these cuts could potentially occur as early as March, introducing an alternative timeline for potential monetary policy adjustments.

Looking ahead, the S&P Global Purchasing Managers Index (PMI) data from the United States (US) scheduled for release on Wednesday will be closely observed. This data is significant for providing insights into business activities within the United States and could further influence market sentiments regarding the monetary actions of the Federal Reserve.

EUR/USD touched its weakest level in over a month near 1.0820 on Tuesday. Economists at ING analyze the pair’s outlook.

 A new PMI test

• EUR/USD trades in positive territory near 1.0862, adding 0.12% on the day. 
• The bearish outlook of the pair remains intact below the key EMA; RSI holds below the 50 midline. 
• 1.0895 acts as an immediate resistance level for EUR/USD; the initial support level is seen at 1.0840.

The EUR/USD pair trades on a stronger note during the early European session on Wednesday. The major pair has flirted with the weekly lows of 1.0821 and rebounded to 1.0862. However, the potential upside seems limited as investors turn cautious ahead of the European Central Bank's (ECB) interest rate decision on Thursday. 

Ahead of the ECB key event, the preliminary Eurozone Purchasing Managers Index (PMI) will be due. The Composite PMI is expected to improve from 47.6 to 48.0 in January. The Manufacturing PMI is estimated to rise to 44.8, and the Services PMI is projected to grow to 49.0. 

According to the four-hour chart, EUR/USD keeps the bearish vibe unchanged below the 50- and 100-period Exponential Moving Averages (EMA) with a downward slope. Furthermore, the Relative Strength Index (RSI) stands in bearish territory below the 50 midlines, suggesting that further decline looks favorable.

The 50-period EMA at 1.0895 acts as an immediate resistance level for the major pair. The crucial upside barrier will emerge at 1.0915, portraying the confluence of the upper boundary of the Bollinger Band and the 100-period EMA. The next hurdle is located near a high of January 15 at 1.0967, and finally at the 1.1000 psychological round figure. 

On the other hand, the initial support level is seen near the lower limit of the Bollinger Band at 1.0840. The additional downside filter to watch is a low of January 23 at 1.0820. Further south, the next downside stop is located near a low of December 13 at 1.0773.

EUR/USD four-hour chart

• EUR/USD attempts to gain ground ahead of PMI data from the Eurozone and Germany.
• The downbeat EU Consumer Confidence weighed on the Euro.
• The risk-averse sentiment is driving the US Dollar in an upward direction.
• Fed is expected to not adjust its monetary policy at the February's decision.

EUR/USD strives to retrace its recent losses, trading slightly higher near 1.0850 during the Asian session on Wednesday. However, the Euro (EUR) encountered downward pressure following the preliminary Consumer Confidence released by the European Commission on Tuesday, indicating a decrease in consumer trust regarding economic activity. The index declined to -16.1 against the expected reading of -14.3 in January and the previous reading of -15.0.

Market participants will observe the HCOB Purchasing Managers Index (PMI) data from the Eurozone and Germany on Wednesday. Thursday marks another rate call and the release of a monetary policy statement from the European Central Bank (ECB). The ECB has generally predicted a stable interest rate environment until the summer months unless there are significant shifts in the underlying economic indicators.

The US Dollar Index (DXY) maintains its stability following a recent increase, driven by ongoing buying interest in the US Dollar amid risk aversion sentiment. This behavior is likely linked to heightened geopolitical tensions in the Middle East. However, the decline in short-term US Treasury yield could undermine the US Dollar, which in turn, acts as a tailwind for the EUR/USD pair. The 2-year US yield trades lower at 4.33%, down by 87%, by the press time.

Market sentiment indicated a decreased probability of a rate cut by the Federal Reserve in March. Nevertheless, there is complete pricing in of a 25 basis point (bps) cut, and the likelihood of a more significant 50 bps cut stands at 50% in May. Traders are likely awaiting the release of the S&P Global Purchasing Managers Index (PMI) data from the United States on Wednesday.

• EUR/USD finds itself close to the 200-day SMA as investors brace for PMI figures.
• Wednesday sees preliminary PMI January data for both the EU and the US.
• Markets expect a European uptick but flattening US services.

EUR/USD drifts into a key midrange figure early Wednesday as European and US Purchasing Managers’ Index (PMI) figures loom over the market for the mid-week trading session.

Markets are broadly expecting pan-European HCOB Composite PMI figures to rebound in January from 47.6 to 48.0, which would represent an eighth straight month of sub-50.0 combined PMI activity for the European continent.

On the US side, market forecasts are looking for the S&P Global Manufacturing PMI component to hold steady at 47.9 while the Services PMI component is expected to tick down from 51.4 to 51.0.

After PMIs are done landing on markets, Thursday brings another rate call and monetary policy statement from the European Central Bank (ECB), which has broadly forecast a lack of movement on interest rates until the summer months barring any drastic changes to underlying economic figures. Still, investors will be keeping a close eye on the ECB’s policy statement for any clues about how deep into dovish or hawkish territory ECB President Christine Lagarde and her cohort of central bank policymakers are leaning following Wednesday’s PMI activity expectation figures.

Thursday also sees an update to US Gross Domestic Product (USD) on an annualized basis, with YoY GDP forecast to trim back to 2.0% from 4.9% for the year ended in December.

EUR/USD Technical Outlook

The EUR/USD saw a quick plunge into touch range of 1.0820 following a harsh rejection from the 200-hour Simple Moving Average (SMA) just above 1.0910, sending the major pair back below the 1.0900 handle for the third time in a week.

Daily candlesticks show the EUR/USD coiling tightly into the midrange as broad-market momentum tilts into the middle, and the pair is adrift on market tides in a congestion zone between the 50-day and 200-day SMAs near 1.0925 and 1.0850 respectively.

EUR/USD Hourly Chart

EUR/USD Daily Chart

• EUR/USD declines into five-week lows as safe haven flows pick up the Greenback.
• PMI figures from both the EU and the US due on Wednesday.
• ECB rate call to take center stage on Thursday, US PCE inflation on Friday.

The EUR/USD tumbled into fresh lows for 2024, hitting its lowest bids in nearly six weeks after the Euro extended broad-market declines on the back of souring consumer sentiment and declining bank lending activity confirmed by the latest Bank Lending Survey from the European Central Bank (ECB).

Europe saw extended declines in the Euro (EUR) after the ECB confirmed that business and lending activity in the euro area continued to decline. High interest rates exacerbated overall declines in bank lending activity across the continent, and European banks further tightened lending conditions through the fourth quarter of 2023.

Daily digest market movers: EUR/USD backslides as bad data releases pile up

• The European Consumer Sentiment Index declined to -16.1 in January versus the forecast rebound from December’s -15.0 to .14.3.
• The US Richmond Fed Manufacturing Index also declined to its lowest level in nearly four years in January, printing at -15 compared to December’s -11 and missing the market’s forecast recovery to -7.
• The ECB’s latest Bank Lending Survey showed bank lending activity declined further in the fourth quarter, with high interest rates and souring consumer sentiment specifically highlighted as key triggers.
• The ECB noted that European banks have broadly tightened lending conditions, squeezing credit access that has already seen slumping demand.
• Overall loan demand from both businesses and households is expected to decline further in 2024’s first quarter.
• Lending activity declines slowed in the fourth quarter, but continue to slowdown, exacerbating declines in economic activity.
• Wednesday brings Purchasing Managers’ Index (PMI) figures for both the euro area and the US.
• Markets are hoping the pan-European HCOB Composite PMI sees a slim gain from 47.6 to 48.0.
• The euro area’s Composite PMI has been in sub-50.0 contraction territory since July.
• US Services PMI is expected to decline slightly from 51.4 to 51.0.
• ECB descends on markets with its latest rate call on Thursday.
• Market expectations of steep and dep rate cuts from the ECB have been pushed back by central bank officials constantly warning that market hopes for rate cuts have run too far ahead of what policymakers can deliver.

Technical Analysis: EUR/USD gets knocked back sharply from 1.0900 once again

The EUR/USD fell below the 1.0900 handle on Tuesday for the third time in less than a week after the pair saw a sharp rejection from the 200-hour Simple Moving Average (SMA) near 1.0915, shedding over eight-tenths of a percent top-to-bottom.

Tuesday’s decline sees the EUR/USD pair taking a bear run into the 200-day SMA after falling away from the 50-day SMA near 1.0920. EUR/USD intraday volatility sees the pair in rough consolidation trading between the 50-day and 200-day SMAs, and an extended decline will see the pair making a run at the last swing low near 1.0750.

EUR/USD Hourly Chart

EUR/USD Daily Chart