Eurozone Services PMI and German HICP

The EUR/USD pair is currently under pressure. It is trading close to 1.1700 after failing to break past 1.1740. December’s Eurozone Services PMI has been revised down to 52.4 from 52.6, negatively affecting the Euro. On Monday, the Euro was supported by weak US economic data and cautious comments from the Federal Reserve. Previously, the Euro rose due to poor US manufacturing data and indications of possible easing from the Fed. The downgrade of the Eurozone Services PMI from 52.6 to 52.4, down from November’s 53.1, has weighed on the Euro. Traders are now awaiting German HICP data, which could influence the Euro’s short-term movements. The US ISM Manufacturing PMI also dropped, with new orders declining and prices increasing. Comments from Fed President Kashkari raised speculation about potential monetary easing in the US, which weakened the Dollar. Additional US Dollar developments include a speech from Richmond Fed President Barkin and upcoming labor data, especially the Nonfarm Payrolls report. The Euro showed strength against the Swiss Franc, though trading remains cautious due to technical resistance.

Focus on Technical Analysis and Market Inertia

Traders are focused on US labor reports to understand the Fed’s next steps. Technical analysis indicates that EUR/USD is hesitating above 1.1700. The MACD suggests a slight rise in momentum, but the RSI remains below neutral. Expectations for German HICP are set at 2.2% for December, down from 2.6%. This data could impact the Euro. The market is cautious, influenced by economic indicators and global events. The EUR/USD pair is currently around the 1.0850 mark, showing a familiar hesitation. This situation mirrors what we observed around this time in January 2025, when the pair also struggled near 1.1700. The market is waiting for a clear signal before taking a definitive direction. Last year, downward revisions to the Eurozone Services PMI pressured the Euro. Today, we’re seeing a similar scenario with new data indicating a 0.7% decline in German industrial production for November 2025. However, the latest Eurozone Core CPI for December remained steady at 3.4%. This presents a challenge for the European Central Bank, similar to mixed signals from a year ago. On the US side, the narrative of a cooling economy is resurfacing, echoing the weak manufacturing data from January 2025. The recent JOLTS report showed job openings dropped to 8.79 million, hinting at a more lenient labor market and raising questions about the Fed’s rate plans. Like last year, attention is now on this Friday’s Nonfarm Payrolls report for confirmation. In light of the volatile trading and important data releases on the horizon, we suggest derivative strategies over straight directional bets. A long straddle or strangle on EUR/USD, centered around the current 1.0850 level with an expiration after the NFP release, could be effective. This strategy would allow us to profit from a significant price movement in either direction, which is likely once the market digests the upcoming labor data. From a technical perspective, indicators such as the RSI are in neutral territory, indicating a lack of strong conviction, similar to early 2025 conditions. Any upward movements may encounter resistance, while pullbacks could find temporary support. This suggests the market is in a holding pattern. We expect this cautious sideways movement to continue until key US employment figures provide a clearer signal. Create your live VT Markets account and start trading now.

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