URGENT UPDATE: The EUR/USD currency pair has fallen sharply to a critical support level of 1.1670, as traders brace for upcoming inflation and jobs reports that could shift market dynamics. This movement highlights increasing volatility in the forex market, driven by the anticipation of the Eurozone’s CPI data and the US NFP report this week.
The US dollar experienced a temporary decline during the Christmas week but has since regained most of its losses. Analysts note that the price fluctuations during this holiday period are often misleading, as markets typically revert to their original levels. However, the latest macroeconomic indicators suggest a more complex picture. Recent data showed both the NFP and CPI reporting softer than expected figures, leading the market to price in a potential 63 basis points easing cycle by the end of the year.
Traders are closely monitoring these releases, especially with speculation that the Federal Reserve may delay rate cuts until at least March 2024. If upcoming data continues to reflect weakness, expectations for further easing in 2026 could increase, potentially putting further pressure on the US dollar.
On the Eurozone front, the European Central Bank (ECB) maintains a neutral stance, emphasizing a data-dependent approach to policy decisions. ECB officials have reiterated that current policy remains appropriate, indicating they won’t react to minor fluctuations away from their 2% inflation target. The upcoming Eurozone CPI data is critical; if inflation stays below 2.5%, markets may remain stable. However, any rise above this threshold could trigger speculation for a potential rate hike sooner than anticipated.
The EUR/USD has pulled back into the key support zone at 1.1670, where buying interest is likely to emerge. Traders are watching closely, as a sustained break below this level could open the door for a deeper drop towards the 1.14 handle.
Chart analysis reveals that the currency pair recently breached an upward trendline, leading to this pullback. The price is also at the 38.2% Fibonacci retracement level, which may provide additional support for buyers looking to capitalize on potential rallies towards 1.19. On the shorter-term charts, the EUR/USD is currently trading at the lower end of its daily range, suggesting a consolidation phase or possible pullback towards the 1.1730 level.
Looking ahead, today’s calendar includes the US ISM Manufacturing PMI, while tomorrow marks the release of inflation reports from major European economies. Wednesday will see critical data points, including the Eurozone Flash CPI, US ADP employment figures, and the ISM Services PMI. The week wraps up with the highly anticipated US NFP report on Friday.
As traders position themselves ahead of these pivotal economic indicators, the EUR/USD remains at a crucial juncture, with potential ramifications for both the Euro and the US dollar. The next few days could determine the trajectory of this currency pair, making it essential for market participants to stay informed and ready to act.
