The EUR/USD currency pair has shown a downward trend during the Asian trading session on Friday, hovering just above the mid-1.1700s. This level positions the pair near a nearly one-month low established the previous day. Recent macroeconomic data from the United States highlighted a surprisingly resilient labor market, reinforcing the narrative of strength within the economy. Concurrently, hawkish comments from Federal Reserve officials, along with insights from the January FOMC meeting Minutes, have prompted investors to reduce expectations for aggressive monetary policy easing.
These developments, along with escalating geopolitical tensions, have contributed to a robust performance by the US Dollar (USD), which has registered its strongest gains since January 23. This bullish sentiment around the USD continues to exert pressure on the EUR/USD pair. Additionally, growing speculation regarding potential interest rate cuts by the European Central Bank (ECB) has undermined confidence in the Euro, further contributing to the pair’s decline.
Traders are now eagerly awaiting the release of flash PMIs from both the Eurozone and the United States, which may offer short-term trading opportunities. Meanwhile, the market’s focus is set to remain on the upcoming Advance US Q4 GDP report and the US Personal Consumption Expenditure (PCE) Price Index, as these indicators may provide fresh insights into economic direction.
From a technical analysis standpoint, the EUR/USD pair appears to have established a foothold below the 1.1780-1.1770 range—a critical confluence that includes the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement level from a significant rise earlier in the year. This region is crucial and is likely to cap any recovery attempts as the underlying bullish tone of the USD persists.
The current technical indicators show that the Moving Average Convergence Divergence (MACD) line remains below the Signal line and the zero mark, coupled with a narrowing negative histogram that suggests diminishing downside momentum. The Relative Strength Index (RSI) is positioned at 29, indicating oversold conditions. While the short-term outlook remains precarious, the combination of an oversold RSI and stabilizing MACD may pave the way for a corrective bounce if momentum shifts positively. A potential recovery could lead to a target at the 50% Fibonacci retracement level situated at 1.1828. Acceptance above this threshold would signify a more favorable outlook, whereas failure to reclaim this level would likely keep sellers in control.
Additionally, market participants are gearing up for the next release of the HCOB Composite PMI, scheduled to provide insights into private business activity across the Eurozone’s manufacturing and services sectors. This index serves as a forward-looking indicator, with values above 50 indicating economic expansion—a positive sign for the Euro—while readings below 50 suggest contraction, which can be seen as bearish for the currency. The consensus anticipates a slight improvement to 51.5 from the previous reading of 51.3, signaling cautious optimism in the market.
