EUR/USD edges higher despite Eurozone Services PMI figures disappointment
The Euro (EUR) is experiencing a slight recovery against the US Dollar (USD), trading at 1.1825 at the time of writing, but still far from its weekly peak near 1.1775. The Eurozone Services Purchasing Managers Index (PMI) fell short of expectations, yet the impact on the currency pair has been minimal, as traders await the January Harmonized Index of Consumer Prices (HICP) to make informed investment decisions.
Consumer prices in the Euro area are expected to remain stable below the European Central Bank's (ECB) 2% target, which would allow the bank to maintain interest rates on hold on Thursday, as widely anticipated. However, there's a risk of lower-than-expected inflation, which could fuel speculation about further rate cuts, potentially driving the EUR lower.
The US Dollar, on the other hand, remains stable. President Trump's signing of a bill ending the two-day government shutdown has eased market tensions, and the appointment of Kevin Warsh as the new Federal Reserve Chairman has been well-received. Warsh, a respected policymaker, is expected to be cautious with rate cuts and ensure the central bank's autonomy.
In the economic calendar, the final Services PMI data will reveal the sector's health and could influence Euro crosses. In the US, investors will closely examine the ADP Employment Change report, as the key Nonfarm Payrolls report is delayed due to the recent government shutdown.
Euro Price Today
The table below illustrates the percentage change of the Euro (EUR) against major currencies today. The Euro performed strongest against the Japanese Yen.
USD EUR GBP JPY CAD AUD NZD CHF
USD -0.07% -0.24% 0.44% -0.01% -0.19% 0.22% -0.01%
EUR 0.07% -0.18% 0.54% 0.06% -0.12% 0.29% 0.06%
GBP 0.24% 0.18% 0.69% 0.24% 0.05% 0.47% 0.24%
JPY -0.44% -0.54% -0.69% -0.45% -0.63% -0.23% -0.45%
CAD 0.00% -0.06% -0.24% 0.45% -0.19% 0.22% -0.00%
AUD 0.19% 0.12% -0.05% 0.63% 0.19% 0.40% 0.18%
NZD -0.22% -0.29% -0.47% 0.23% -0.22% -0.40% -0.23%
CHF 0.01% -0.06% -0.24% 0.45% 0.00% -0.18% 0.23%
The heat map showcases percentage changes in major currencies against each other, with the base currency on the left and the quote currency on top.
Market Analysis: Euro's Fragile Recovery
- The Euro has rebounded from its lows but remains significantly below last week's highs, as investors await Eurozone inflation figures to guide the ECB's monetary policy direction.
- On Tuesday, the HCOB Services PMI data revealed a slowdown in sector activity to a four-month low of 51.6, falling short of the preliminary expectation of 51.9, and down from December's 52.4.
- Similarly, the German HCOB Services PMI was revised lower to 52.4 from initial estimates of 53.3, and down from December's 52.7, confirming the sluggishness of business activity in the Eurozone's primary economy.
- On Wednesday, the January preliminary HICP data is expected to show a further easing of price pressures, reaching a 1.7% year-on-year growth, down from 1.9% in December and 2.1% in November. The core HICP, crucial for monetary policy, is projected to grow steadily at a 2.3% yearly pace.
- Concurrently, the Eurozone Producer Price Index is anticipated to indicate higher deflationary pressures, with a 2.3% year-on-year contraction in December, following a 1.7% decline in November, further supporting the argument that a strong Euro is pushing inflation lower.
- In the US, attention will be on the January ADP private payrolls report, the week's main employment data. Net job creation is expected to have increased to 48K last month from 41K in December, remaining at relatively low levels.
Technical Analysis: EUR/USD's Potential Trend Shift
EUR/USD has demonstrated a moderate recovery from Monday's lows at 1.1775, with indicators on the 4-hour chart suggesting diminishing bearish pressure. The Moving Average Convergence Divergence (MACD) line is poised to cross above the signal line, indicating a potential bullish move, and the Relative Strength Index (RSI) has reached levels just below the 50 line, which separates the bearish and bullish zones.
However, price action remains confined within Monday's trading range. Bulls must break above the weekly top at 1.1875 to confirm the pair's recovery, targeting the resistance area between the January 29 high at 1.1995 and the psychological 1.2000 level.
Immediate support is located at the February 2 and 3 lows, near the 1.1775 area. Further down, bears may find interest in the January 21 low, approximately 1.1660.
(The technical analysis in this section was generated with the assistance of an AI tool.)
Economic Indicator: HCOB Services PMI
The Services Purchasing Managers Index (PMI), released monthly by S&P Global and Hamburg Commercial Bank (HCOB), serves as a leading indicator for business activity in the Eurozone services sector. Given the sector's dominance in the economy, the Services PMI is a critical gauge of overall economic conditions. Data is derived from surveys of senior executives in the services sector, reflecting changes compared to the previous month and anticipating trends in official data series like GDP, industrial production, employment, and inflation. The index ranges from 0 to 100, with 50.0 signaling no change. Readings above 50 indicate expanding services activity, a bullish sign for the Euro (EUR), while those below 50 suggest declining activity, seen as bearish for EUR.
