EUR/USD Consolidation Signals Caution Before Major US Employment Release

Technical Pressure Mounts as EUR/USD Tests Support Levels

The EUR/USD pair is currently navigating a consolidation phase below the 1.1700 mark, trading around 1.1680 and approaching key support zones that could determine the next directional move. To put this in perspective, 39 EUR to USD translates to approximately $42.55 at current rates, highlighting the pair’s relatively compressed trading range. The currency pair is experiencing downward pressure stemming from December’s highs near 1.1808, with the pair now pulling back to test support around 1.1660.

From a technical standpoint, the signals remain decidedly mixed. The MACD histogram is hovering near the zero line, suggesting neither strong bullish nor bearish momentum at present. Meanwhile, the RSI indicator sits around the 40 level, indicating neither overbought nor oversold conditions. The January 5 low at 1.1659 brings the pair perilously close to the December 8-9 lows near 1.1615—a critical support zone that, if breached, could trigger further downside movement. Resistance remains entrenched just below 1.1700, with additional barriers at 1.1725 (descending trendline from December highs) and 1.1740 (Tuesday’s high).

US Economic Data Leaves Fed’s Path Unclear, Creating Risk-Off Sentiment

Wednesday’s US economic releases failed to provide traders with clarity on the Federal Reserve’s near-term policy direction, leaving the market in a holding pattern ahead of Friday’s critical Nonfarm Payrolls report. This uncertainty has subdued risk appetite and kept EUR/USD trading within narrow parameters.

The employment picture painted by recent data suggests underlying weakness in the labor market. The December ADP Employment report disappointed, showing only 41,000 new jobs added against expectations of 47,000. November’s initial estimate was also revised downward to -29,000 job losses from an earlier -32,000 reading. The JOLTS report reinforced these concerns, revealing that job openings fell to 7.1 million in November, well below the anticipated 7.6 million and notably lower than October’s revised 7.449 million figure.

However, offsetting some of this gloom, the US ISM Services PMI surged to 54.4 in December, marking its strongest reading in over a year and up substantially from November’s 52.6 print. This contradiction—weak employment coupled with robust service-sector activity—has left Fed watchers scrambling to piece together a coherent narrative about the economy’s true health heading into 2026.

Eurozone Data Offers Limited Upside, but Sentiment Indicators May Surprise

European economic releases are expected Thursday, which could provide modest tailwinds for the Euro should results beat expectations. However, investors are exercising considerable caution, preferring to hold their powder dry until the Nonfarm Payrolls report clarifies the Fed’s trajectory.

German Factory Orders delivered a pleasant surprise, surging 5.6% month-over-month in November—a stark reversal from the anticipated 1% contraction and building on October’s 1.6% gain. On an annual basis, orders jumped 10.5% after a previous month’s 0.7% decline. This resilience in Germany’s industrial base could support the EUR/USD pair should momentum continue.

The Eurozone unemployment rate is projected to remain steady at 6.4% for November, holding firm despite broader economic uncertainties. Meanwhile, the European Commission is scheduled to publish sentiment indicators that could influence short-term positioning. The Economic Sentiment Indicator is forecast at 97.0 for December (unchanged), Consumer Confidence is expected to remain at -14.6, and Industrial Confidence is projected to edge marginally higher to -9.1 from November’s -9.3.

In the US, weekly jobless claims are anticipated to rise to 210,000 for the final week of December, up from the prior 199,000. However, with the major Nonfarm Payrolls data imminent, these claims figures are likely to attract minimal trading attention.

Market Positioning: Wait-and-See Mode Dominates Ahead of Friday’s Jobs Print

The broader market narrative is one of cautious hesitation. Traders are reluctant to establish substantial US Dollar positions until Friday’s Nonfarm Payrolls report arrives, and similarly avoiding aggressive Euro bets until the full employment picture emerges. This cautionary stance has compressed trading ranges and kept EUR/USD pinned in its current consolidation zone.

The divergence between weak employment metrics and strong services data has created genuine confusion about whether the Fed will maintain its current stance or pivot based on labor market deterioration. Until this ambiguity is resolved, expect EUR/USD to remain range-bound, with the outcome of Friday’s jobs report likely serving as the catalyst for the next meaningful directional move.