EUR/USD Closes in Negative Territory: Dollar Dominates the Week, Euro Under Pressure

The EUR/USD pair ended the week with a 0.7% decline, stabilizing around 1.1640. Recent trades placed the quote at 1.1636, after reaching a daily high of 1.1662. Downward pressure persists thanks to the strength of the Dollar, which continues to benefit from favorable macroeconomic factors in the United States, even in the face of mixed economic results.

US Labor Market Disappoints, but Unemployment Surprises Positively

December’s Nonfarm Payrolls in the United States showed only 50,000 new jobs created, a figure below both market expectations (60,000) and the revised November data (64,000). However, the unemployment rate unexpectedly improved, falling from 4.6% to 4.4% according to the Bureau of Labor Statistics.

This mixed picture has not shaken confidence in Dollar-related assets. In fact, traders have maintained their primary focus on the robustness of the US currency, relegating the conflicting data from the American economy to the background. Even difficulties in the real estate sector – with Building Permits and New Housing Starts down compared to the previous month – have not reversed the favorable trend for the greenback.

Signals of Resilience from the Eurozone, but Not Enough

In the Eurozone, the situation is more complex. Consumer spending accelerated by 0.2% month-on-month in November, surpassing market estimates and improving from the stagnant October figure. This positive development could suggest some vitality in European consumption, yet pressure on the Euro persists.

German indicators present a mixed picture: Industrial Production beat forecasts, but the trade surplus contracted due to declining exports. This mix of positive and negative data has not been enough to counter the strength of the Dollar and the bearish trend of EUR/USD.

On the American side, the University of Michigan Consumer Sentiment Index for January surprised to the upside, reaching 54 compared to the previous 52.9 and exceeding forecasts of 53.5. One-year inflation expectations remained stable at 4.2%, while five-year expectations rose to 3.4% from 3.2%.

Rate Outlook and a Decisive Week Ahead

Money markets continue to price in a total of 50 basis points of rate cuts by the end of the year, according to the CME FedWatch Tool. However, comments from Federal Reserve officials offer a more cautious outlook. Raphael Bostic, President of the Atlanta Fed, described job growth as “modest” and highlighted that more time will be needed to offset missing inflation data from last autumn.

Thomas Barkin of the Richmond Fed noted that the labor market remains stable, although new hiring is still limited. According to Barkin, it will be necessary to wait until April for inflation data to be fully updated. These comments leave open questions about the trajectory of rates, indirectly supporting the strength of the Dollar.

Next week will be crucial for both regions. In the Eurozone, investors will monitor speeches by European Central Bank officials, the Sentix Investor Confidence index, and new HICP data for the region, Germany, Spain, and Italy. In the United States, focus will be on consumer and producer price indices, retail sales, unemployment benefit claims, and statements from Federal Reserve representatives.

Technical Analysis: EUR/USD Under Pressure, Oversold in Sight

From a technical perspective, EUR/USD shows a clearly bearish trend, with sellers maintaining control of the market. The pair has broken through key support levels, trading below the 100- and 50-day Simple Moving Averages at 1.1663 and 1.1641, respectively.

The Relative Strength Index (RSI) has fallen to 38, indicating that oversold conditions are approaching and that the bearish sentiment is intensifying. This scenario increases the likelihood of further declines in the short term.

The first critical support level is at 1.1600. If this barrier breaks, the next target becomes the 200-day Simple Moving Average at 1.1565, which represents the last bastion before the technical outlook turns decidedly pessimistic for buyers. Further downside targets include 1.1500 and the August low at 1.1391.

Conversely, if buyers manage to recover ground and push back toward the 50- and 100-day SMAs, the main resistance would be at 1.1700, with the 20-day Simple Moving Average at 1.1730 as the next level to watch for confirmation of a breakout.

The week has solidified the Dollar’s position as the dominant currency, while the Euro continues to struggle against an unfavorable current, both from economic data and technical profile.