The dollar maintains the lead while EUR/USD slips below 1.1652

The Downward Pressure Continues for the Euro-Dollar Exchange Rate

The EUR/USD currency pair continues its bearish phase, completing the fourth consecutive session of decline. Currently, the exchange rate is quoted around 1.1652, reflecting a decrease of 0.19% during the session. The main upward push for the greenback comes from stronger-than-expected US employment figures, which contrast with signals of slowdown from the Eurozone, further widening the attractiveness differential between the two currencies.

USA: Employment Data Surprises to the Upside

Numbers from the US labor market continue to surprise positively. Initial unemployment claims for the week ending January 3rd stood at 208,000, slightly higher than the 200,000 from the previous week but below the 210,000 forecasted by the Department of Labor. This data suggests a still resilient employment market.

Wednesday’s ADP report confirmed solid job creation growth, while the December Challenger Job Cuts report indicated 35,553 layoffs, about half of the previous month. These insights fuel expectations around Nonfarm Payrolls and are significantly influencing investor behavior toward the Dollar.

Additional supportive elements include an improvement in trade conditions. The US trade deficit for goods and services contracted significantly in October, falling to $29.4 billion from $48.1 billion previously, mainly driven by a reduction in pharmaceutical imports.

Eurozone: Contrasting Signals and Monetary Policy Slowdown

Meanwhile, European monetary authorities seem to have exhausted their easing cycle. December producer price data showed annual contractions, indicating persistent moderation of inflationary pressures in the region.

However, the European economic outlook presents mixed signals. The Producer Price Index rose 0.5% in October, above the 0.2% estimate, while on an annual basis, prices declined by 1.7%, a less sharp decrease compared to the 1.9% forecast.

In December, consumer confidence showed signs of improvement, and business climate indicators turned more positive. Notably, German factory orders for November jumped 5.6% month-over-month, well above the 1% estimate and recovering from October’s 1.6%. However, the Economic Sentiment Indicator weakened in December, with declines across service providers, retail operators, and consumers.

The Dollar Index Breaks Through Technical Resistance

The appreciation of the Dollar is clearly reflected in the DXY index, which gained 0.19%, reaching 98.91. A key technical element is the crossing of the 200-day Simple Moving Average, positioned at 98.87. If the index closes above this level, it could open the way toward the 99.00 target.

Market Sentiment and Inflation Expectations

The consumer expectations survey conducted by the Federal Reserve of New York revealed interesting dynamics. Short-term inflation projections increased from 3.2% to 3.4% in December, while medium- and long-term median estimates remained stable at 3.0%, suggesting inflation concerns are still present but contained.

Despite the dovish tone expressed by Fed Chair Stephen Miran, market participants maintained a mainly cautious stance, having already priced in two interest rate cuts according to available analyses. Meanwhile, Treasury Secretary Scott Bessent urged policymakers to consider more accelerated rate reductions to support economic growth.

Technical Outlook: EUR/USD Remains Vulnerable to the Downside

From a technical chart perspective, the EUR/USD structure continues to show a bearish profile. The quote is expected to close the day below the previous session’s low of 1.1672. The Relative Strength Index remains neutral-bearish, indicating that selling pressure remains present in the short term.

Bearish traders aim to push the pair below the 200-day SMA, located around 1.1561. In the short term, the first support is at the 50-day SMA at 1.1640, followed by the 200-day Simple Moving Average. For bulls to regain control, a move above 1.1700 is necessary, with additional resistance at the 20-day SMA at 1.1733.

In the coming days, focus will remain on US Nonfarm Payrolls and unemployment rate, as well as Eurozone retail sales data and statements from Philip Lane of the European Central Bank, which could redefine the differential between the two currencies.