The US Dollar Continues to Dominate EUR/USD, EUR to USD Exchange Rate Slumped Last Week

EUR To USD Pair Falls Into the Red, Down 0.7% This Week

Last week, the EUR to USD exchange rate experienced a negative trend, with the EUR/USD pair hovering around 1.1640 after a series of consecutive weakening days. The decline lasted for 5 trading sessions, accumulating a loss of 0.7%, and further dropped 0.2% in the last session (Friday). Selling pressure still dominates despite mixed economic signals from the US, while data from the Eurozone also showed positive aspects.

Market Turning Point: Conflicting Data but Dollar Still Wins

The strength of the US dollar continues to be the main factor driving the EUR/USD movement. Although the US December employment report showed some weaknesses—only 50,000 new jobs added versus the forecast of 60,000 and 64,000 last month—the unemployment rate improved significantly from 4.6% to 4.4%. This labor market recovery still supports the US economic outlook.

At the same time, the preliminary Consumer Sentiment Index from the University of Michigan for January exceeded market expectations, reaching 54 (compared to the forecast of 53.5 and 52.9 last month). This data reflects American consumer optimism, while inflation expectations for the coming year remain at 4.2%, rising to 3.4% in the long term. However, these signals are not enough to support the euro’s recovery against the dollar’s strength.

In the Eurozone, consumer spending increased by 0.2% in November compared to October—an increase breaking the stagnation of October and surpassing market expectations. Regional retail sales also showed positive results, but investors continue to ignore these positive data, focusing instead on US economic movements.

In Germany, the economic picture is mixed: industrial production exceeded expectations, but the trade surplus narrowed due to declining exports. These reports indicate ongoing economic pressures at the heart of the European economy.

Notable Figures: US Housing Market Fluctuates

US construction data for October revealed concerning weaknesses. Building permits decreased by 0.2%, from 1.415 million to 1.412 million, while housing starts fell more sharply by 4.6%, from 1.306 million to 1.246 million. These indicators suggest construction activity is losing momentum, potentially impacting overall growth in the coming quarters.

Fed Leadership Outlook: Upward Price Trend “Humble”

Fed Atlanta President Raphael Bostic described current job growth as “humble” and emphasized the need for more time to offset the inflation data imperfections from last fall. This outlook reflects US policymakers’ cautious stance regarding short-term prospects.

Thomas Barkin from Fed Richmond commented that the labor market remains relatively stable, although hiring activity is still limited. He forecasts that inflation data will be fully updated only by April this year, suggesting the Fed will continue monitoring the situation before making its next policy decision.

The market is currently pricing in a total of 50 basis points rate cut by the end of the year according to CME FedWatch Tool.

Dense Economic Calendar: Europe and US to Announce Key Data

Next week will feature a busy economic event schedule in both regions. The Eurozone will release the Sentix Investor Confidence Index, speeches from European Central Bank officials, and updates on the Harmonized Index of Consumer Prices (HICP) for the entire region as well as for Germany, Spain, and Italy.

In the US, focus will be on reports of consumer price index, producer prices, retail sales figures, unemployment claims, along with comments from Fed officials.

Technical Analysis EUR/USD: Oversold Zone and Next Targets

From a technical perspective, EUR/USD is currently showing a clear downtrend as momentum indicators suggest selling pressure remains dominant. The exchange rate is trading around 1.1636, after reaching a daily high of 1.1662, and has broken through two key moving averages: the 100-day SMA (1.1663) and the 50-day SMA (1.1641).

The RSI (Relative Strength Index) has dropped to 38, a clear sign of oversold conditions and continued selling pressure. This technical pattern indicates a high risk of further decline.

Support and Resistance:

The main support level is at 1.1600. If this level is broken, the pair could head toward the 200-day SMA at 1.1565—an important final support before the downtrend could intensify. From there, deeper targets include 1.1500 and the August 1 low at 1.1391.

If buyers regain control of the 50 and 100-day SMAs, resistance levels are at 1.1700, with the 20-day SMA at 1.1730 as the next resistance point to watch.

In summary, EUR to USD remains under strong selling pressure as the dollar maintains its strength. Traders should closely monitor the 1.1600 support level to assess the potential for continued decline.