Eurozone Services PMI and German HICP
EUR/USD is under pressure with current attention on German HICP data, retreating near 1.1700 after being rejected at 1.1740. December’s Eurozone Services PMI has been revised down to 52.4 from 52.6, affecting the Euro negatively.
The currency pair’s performance on Monday was helped by weak US economic data and dovish Federal Reserve commentary. The Euro had previously gained due to weaker US manufacturing data and Federal Reserve hints at potential easing.
The Eurozone Services PMI adjustment from 52.6 to 52.4, down from November’s 53.1, has pressured the Euro. Awaiting German HICP data might influence the Euro’s short-term direction.
US ISM Manufacturing PMI saw a drop, with new orders contracting and rising prices. Comments from Fed President Kashkari added to speculation of US monetary easing, weakening the Dollar.
Further US Dollar influences include Richmond Fed President Barkin’s speech and upcoming US labour data, especially the Nonfarm Payrolls report. Euro showed strength against the Swiss Franc, but trading remains cautious due to technical resistance.
Focus on Technical Analysis and Market Inertia
Traders are focused on US labor reports to gauge Fed’s monetary strategies. Technical analysis shows EUR/USD hesitating above 1.1700, with MACD suggesting improved momentum, while RSI is below neutral territory.
Expectations for German HICP set at 2.2% for December, down from prior 2.6%, could impact the Euro. The market remains cautious, steered by economic indicators and geopolitical events.
We’re seeing a familiar hesitancy in EUR/USD, which is currently pivoting around the 1.0850 mark. This situation feels very similar to what we saw around this time in January 2025, when the pair was also on the defensive near 1.1700. The market is once again waiting for a clear signal before committing to a direction.
Last year, we saw downward revisions to the Eurozone Services PMI put pressure on the Euro. Today, we are seeing a similar conflict with recent data showing German industrial production fell by 0.7% in November 2025, yet the latest Eurozone Core CPI for December held firm at 3.4%. This puts the European Central Bank in a difficult position, much like the mixed signals did a year ago.
On the US side, the narrative of a cooling economy is also re-emerging, echoing the weak manufacturing data from January 2025. The latest JOLTS report showed job openings falling to 8.79 million, signaling a loosening labor market and fueling speculation about the Federal Reserve’s rate path. Just as we did last year, all eyes are now turning to this Friday’s Nonfarm Payrolls report for confirmation.
Given the choppy trading and critical data releases ahead, we believe derivative plays are more prudent than outright directional bets. A long straddle or strangle on EUR/USD, centered around the current 1.0850 level with an expiry after the NFP release, could be an effective strategy. This approach allows us to profit from a significant price move in either direction, which is likely once the market digests the new labor data.
From a technical standpoint, indicators like the RSI are hovering in neutral territory, suggesting a lack of conviction similar to the conditions in early 2025. Any rallies are likely to face resistance, while dips may find temporary support, reinforcing the idea of a market in a holding pattern. We anticipate this cautious sideways movement will persist until the key US employment figures provide a clearer catalyst.
