The Euro (EUR) faces downward pressure for the second straight day against the US Dollar (USD) as it trades around 1.1790, hovering just above two-week lows of 1.1777. This decline is attributed to mixed economic data from the Eurozone, coupled with a prevailing risk-averse sentiment that favors the USD. The focus now shifts to the European Central Bank’s (ECB) upcoming monetary policy decision.
Earlier today, the Eurozone reported a larger-than-anticipated decline in retail consumption, which offset the optimistic sentiment from strong German Factory Orders. Retail sales contracted by 0.5% in December, significantly more than the predicted 0.2% drop. Moreover, November’s sales figures were revised downwards to show only a 0.1% growth instead of the previous estimate of 0.2%. Meanwhile, German Factory Orders surged by 7.8% in December, far surpassing expectations of a 2.2% contraction, offering a contrasting narrative to the retail performance.
In the US, data released on Wednesday provided a mixed picture as well. The ISM Services Purchasing Managers’ Index (PMI) showed resilient business activity with a reading of 53.8, which was higher than the expected slowdown to 53.5. However, the employment index within the PMI softened, indicating potential labor market concerns which were further corroborated by disappointing data from the ADP Employment Change report. The report indicated an anemic net job creation of only 22,000 jobs in January, considerably below the anticipated 48,000, and highlighted a revised lower figure for December as well.
Markets anticipate that the ECB will maintain its current monetary policy when it meets at 13:15 GMT on Thursday. Investors are particularly attentive to the ECB’s rhetoric regarding future policy direction, especially in light of recent Euro appreciation which has raised worries about deflationary pressures. Any hints of a dovish stance from the ECB might push the Euro down to new lows.
Later today, additional data releases are expected to include Eurozone Retail Sales figures, which are forecasted to show another contraction of 0.2% in December following November’s minor increase. In the US, Initial Jobless Claims are also anticipated to rise slightly to 212,000, and the JOLTS Job Openings are projected to exhibit only a minor uptick to 7.2 million.
From a technical standpoint, the EUR/USD pair currently consolidates losses and has support at around 1.1775, which remains in focus for bearish traders. The Moving Average Convergence Divergence (MACD) histogram indicates neutral momentum, whereas the Relative Strength Index (RSI) near 40 suggests a bearish tendency. A break below the 1.1775 level could lead to further declines toward the January 23 low of 1.1728 and the January 22 low of 1.1670. Conversely, immediate resistance is noted near the recent high of 1.1840 and the earlier support level around 1.1900.
As the markets prepare for the ECB’s decisions and subsequent press conference, volatility in the Euro is expected, influenced by any changes in policy tone or guidance offered by ECB officials.
