Euro continues to decline due to weak signals from the Eurozone

The main market theme today for EUR/USD is that if it falls below the key level of 1.1700 amid pressure from Eurozone economic data, the euro today has declined by more than 0.28% as various indicators in the region point to economic slowdown.

Pressure from Employment and Inflation Data

The key factor driving the euro’s losses is that inflation in Germany (the largest economy in the Eurozone) has fallen below 2% according to the HICP index. The Eurozone (PMI) services index also decreased to 52.4 in December, down from 53.1 in the previous month. This signals that business activity is losing momentum, while the ECB has already confirmed that monetary policy easing has concluded unless the economy experiences a severe slowdown in the future.

This has led ECB officials to show a somewhat mixed stance, while Germany shows signs of weakness. Traders are awaiting further comments from the US, with upcoming data such as ADP, ISM Services, and JOLTS scheduled for next week.

The US Still Keeps the Market Guessing

In the US, the S&P Global Services PMI index declined from 54.1 to 52.5 in December, indicating that economic growth is losing momentum. Economist from S&P Global Market Intelligence stated that although business is still expanding, the strong momentum seen in the previous quarter is waning.

Federal Reserve officials have shown differing views. Thomas Barkin said that future decisions need to be “carefully calibrated,” citing risks on both sides regarding employment and inflation, and indicated that current interest rates are appropriate. Meanwhile, Stephen Miran has been more dovish, supporting further rate cuts, mentioning the possibility of a 100 basis point reduction in 2026.

The US dollar index (DXY) rose by 0.25% to 98.61 but still could not hold the EUR/USD position.

Technical Picture Turning Downward

From a technical perspective, EUR/USD is currently at risk of declining further if the pair drops below 1.1700. The next support level is the 100-day SMA at 1.1663, just 20 points away. If this level is broken, the pair could then move toward the 50-day SMA at 1.1639 and the 200-day SMA at 1.1553 respectively.

On the bullish side, traders need to clear the 20-day SMA at 1.1729 before risking a decline to 1.1750 and opening the way to 1.1800. However, given the ongoing weakness in the Eurozone and the clear signals of ECB easing, a rebound in the near term seems unlikely.